Clariant and Huntsman nix $20 billion deal

The activist investor White Tale Holdings has pressured Clariant and Huntsman Corp. to drop plans to combine into the world’s second-largest specialty chemicals company with annual sales of some $13 billion. With that job complete, White Tale is now pushing Clariant to make more changes.

Clariant and Huntsman announced the agreement in May. Valued at about $20 billion, the merger of equals was intended to create a larger firm better positioned to compete in specialty chemicals, expand profits, and reduce costs. The companies promised annual savings of $400 million.

But White Tale contended that the deal undervalued Switzerland-based Clariant and was a “complete reversal of the company’s long-standing strategy to become a pure-play specialty chemicals company.” Even though Huntsman had recently spun off its titanium dioxide pigments business, White Tale viewed the U.S. firm as less of a specialized chemical maker than Clariant.

As it gradually increased its ownership stake in Clariant to a level that now exceeds 20%, White Tale was able to pressure the CEOs of the two firms to halt the transaction. The CEOs acknowledged that Clariant might not have been able to secure approval for the merger from two-thirds of its shareholders, as required under Swiss law.

Following the breakup on Friday, Oct. 27, White Tale is now pushing Clariant to make further changes. “Unfortunately,” the firm writes in an open letter, “Clariant management’s comments since Friday betray a desire to go back in time and pretend this episode did not occur.”

White Tale says Clariant must hire an independent financial advisor to assess its options, including White Tale’s suggestion that the Swiss firm sell its plastics and coatings division to become a more pure specialty chemical company.

White Tale also wants three representatives on Clariant’s board of directors.

In a statement, Clariant says its managers have been talking with White Tale regarding “the new situation for the company and ways to work together in the future.”