Huntsman and Clariant agree merger of equals

July 2017 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

July 2017 Issue

Clariant AG and Huntsman Corporation announced a merger of equals which will create a leading global speciality chemical company with an enterprise value of approximately $20bn, including debt.

The merger, announced in late May, is expected to generate more than $400m in annual cost savings, leading to $3.5bn in value creation, according to a joint statement. Under the terms of the all-stock deal, Huntsman shareholders will receive 1.2196 shares in the new company for each Huntsman share they own. Clariant shareholders will have a 52 percent stake in the combined company, which will be known as HuntsmanClariant. The deal is expected to close by the end of 2017, pending shareholder and regulatory approval, as well as other customary closing conditions.

“This is the perfect deal at the right time,” said Hariolf Kottmann, CEO of Clariant. “Clariant and Huntsman are joining forces to gain much broader global reach, create more sustained innovation power and achieve new growth opportunities. This is in the best interest of all of our stakeholders. Peter Huntsman and I share the same strategic vision and I look forward to working with him.”

The merger of Swiss firm Clariant, a maker of aircraft de-icing fluids, pesticide ingredients and plastic colouring, and US company Huntsman, whose chemicals are used in paint, clothing and construction, is part of a growing trend of mergers among chemicals companies in Europe, where growth in the sector has slowed in the face of strong competition from Asia. Since 2015, European chemicals companies BASF, Solvay, Evonik, and Lanxess have agreed to multibillion-dollar takeovers.

Peter R. Huntsman, president and CEO of Huntsman, said: “I could not be more enthusiastic about this merger and look forward to working closely with Hariolf Kottmann, a man I have admired and trusted for the past decade. We also look forward to a close association with his immensely talented colleagues around the world. Together, we will create a global leader in specialty chemicals with a combined balance sheet providing substantial financial strength and flexibility.”

Mr Huntsman will become CEO of the combined company; Mr Kottmann will serve as chairman. The combined company will be headquartered in Switzerland, although its operational centre will be in The Woodlands, Texas. The combined firm will operate in more than 100 countries and employ around 32,000 people.

Clariant, which was formed in the mid-1990s from parts of Swiss firm Sandoz and Germany’s Hoechst, has undergone extensive restructuring in the five years since Mr Kottmann assumed control of the company. In that time, it has shed a number of underperforming businesses, including a textile and paper chemicals unit in 2012. The firm has also restructured its managerial hierarchy, placing greater responsibility on lower-level managers to improve the company’s decision-making processes. In mid-2015, Clariant also began to carve out its plastics and coatings business, transferring it into a separately managed entity.

Huntsman will complete the planned separation of its pigments and additives business, to be called Venator Materials, this summer. In March, Huntsman said it was evaluating other options regarding its future, including a possible merger, to increase shareholder value. The deal with Clariant is, in many respects, a result of increased investor activism. Investors have been calling on the company’s management team to identify a better growth strategy for Clariant, and it is hoped that the merger with Huntsman will prove profitable. According to the two firms, the newly merged business will be more profitable than either standalone company, thanks, in part, to the cost savings that the deal is expected to generate. Furthermore, the combined company’s profit margin of 17.2 percent will outpace Clariant’s 15.2 percent and Huntsman’s 13.4 percent going forward.

Richard Summerfield