Clariant and Huntsman to join in $20 billion deal

Swiss specialty chemical company Clariant will combine with U.S. chemical maker Huntsman Corp. in a merger of equals valued at about $20 billion. By joining, the companies hope to better compete in high-growth markets, expand profit margins, and cut operating costs.

The new company will be called HuntsmanClariant and will combine Huntsman’s advanced materials, performance products, polyurethanes, and textile effects businesses with Clariant’s catalysts, personal care, oil and gas, and plastics and coatings businesses. The two firms expect the deal to close by the end of the year.

With annual sales of about $14 billion, HuntsmanClariant will vie with Covestro to be the world’s second-largest specialty chemical maker after Evonik Industries.

In recent years both Clariant and Huntsman have sought to sell off lower-value businesses. In 2012, Clariant divested its textile and paper chemicals business, and it has recently worked to spin off its plastics and coatings businesses. The latter will stay in the new firm’s portfolio for now.

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, including a merger, to increase shareholder value.

Once the deal closes, Huntsman shareholders will own 48% of the new company based on the difference in the values of the two firm’s shares. Peter R. Huntsman, Huntsman’s CEO, will serve as CEO of HuntsmanClariant, and Clariant CEO Hariolf Kottmann will be chair of the board. Clariant’s home base in Pratteln, Switzerland, will be the new firm’s headquarters, and operations will be in The Woodlands, Texas, where Huntsman is based.

The firms say HuntsmanClariant will be more profitable than either stand-alone company, in part because of a projected $400 million in annual cost savings. Its combined profit margin of 17.2% will outpace Clariant’s 15.2% and Huntsman’s 13.4%, they say.

HuntsmanClariant’s largest end market will be consumer specialties, including chemicals used in personal care, packaging, and textiles. The executives also stress complementary businesses aimed at automotive manufacturing.

“Clariant and Huntsman are joining forces to gain much broader global reach, create more sustained innovation power, and achieve new growth opportunities,” Kottmann says. Peter Huntsman adds, “Together, we will create a global leader in specialty chemicals with a combined balance sheet providing substantial financial strength and flexibility.”

The merger is subject to approval by shareholders and regulators. Shareholder reaction to the news was mixed. Clariant shares closed up 3.5% on May 22, the day the deal was announced; Huntsman shares were down slightly in midday May 22 trading.