14th July 2020

HUNTSMAN-CLARIANT MERGER OFF

In the wake of pressure from activist investors, US-based Huntsman Corp. and Swiss-based Clariant have decided they will not pursue their intended US$20-billion merger. The two companies announced the merger in May, nd expected it to close before the end of the year. Both are major suppliers of raw materials for coatings formulation.

In July, White Tale, a joint venture of New York investment firm 40 North and hedge fund Corvex, began buying shares of Clariant, and pressured the company to look at other options for value creation. The firms said the merger with Huntsman would not create ideal value for Clariant investors.

In September, White Tale increased its Clariant stock to over a 15 percent share, and sent an open letter to the company’s board in which it confirmed its opposition to the merger. The hedge funds stated the merger had “no strategic merit” and undervalued Clariant ,while overvaluing Huntsman. They also expressed concerns that Clariant would cede operation control to Huntsman, “demonstrating a severe lack of due diligence with regard to Huntsman’s operational track record.”

Clariant said initially that the merger would create over $3.5-billion in value, through cost and tax synergies as well as complementary product portfolios. It also noted that while Huntsman’s president and CEO, Peter Huntsman, would become CEO of the new company, there would be no ceding of operational control along with the deal.  In response, Peter Huntsman stated that White Tale’s interests centered the “short-term, break-up value of Clariant,” and were “not about Huntsman.”

According to some media reports, White Tale’s stake in Clariant rose subsequently to 20 percent. That increased stake, along with other investors expressing concerns about the deal, reportedly left the company uncertain a shareholder vote on the deal would result in the two-thirds Yes votes needed to proceed.

Huntsman had over $9.6-billion in sales in 2016. Clariant 's sales were about US $6.01-billion in the same year.

www.huntsman.com