Activists Notch Victory As Clariant-Huntsman Merger Canceled

Oct 27 2017 | 10:02pm ET

The $20 billion merger struck last May between Swiss specialty chemicals maker Clariant and U.S. group Huntsman was scuttled on Friday, handing a victory to activist investors who have agitated against the deal as being destructive to shareholder value. 

Clariant agreed to buy Huntsman in an all-stock transaction described at the time as a “merger of equals” resulting in a leading global specialty chemical company with annual sales of more than $13 billion, an enterprise value north of $20 billion, and estimated annual cost savings of $400 million. Under the proposed merger terms, Clariant shareholders would have owned 52% of the new entity in a 1-for-1 swap with their current shares, while Huntsman shareholders would have received 1.2196 shares for every Huntsman share they owned.

Keith Meister’s activist hedge fund Corvex Management combined with 40 North to oppose the deal last July, initially taking 7.2% stake in Clariant through a vehicle named White Tail. The activists argued the merger would not be as beneficial as the two companies believed, and would exposing Clariant to Huntsman’s high debt load and its volatile commodity chemicals business.

The White Tail position had reached 20% of Clariant by Thursday, according to a Reuters report, an unusually high stake for activists. When combined with other skeptical shareholders, it left the two companies unlikely to gather the two-thirds of shareholders needed for approval. Both companies agreed to waive break-up fees.

Scrapping the merger means Clariant and Huntsman both become attractive takeover candidates as well as other acquisition options, the Reuters article said, including the establishment of a strategic dialog with White Tail. As of Friday, the activist consortium had not yet unveiled any alternative plans for Clariant, although Germany’s Evonik reportedly might be interested in portions of the company, Reuters added. 

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