When Clariant CEO Hariolf Kottman and Huntsman CEO, Peter R. Huntsman, announced a ‘merger of equals’ on May 22nd, 2017, no one knew that the merger would lie in tatters by the end of the year. The joint announcement, apparently approved unanimously by both Boards of Directors, presented a clear and definitive agreement to combine through an all-stock transaction. The newly merged company, which would have been known as HuntsmanClariant, would have been a global specialty chemical company, benefitting from innovation and an increased growth profile in diverse geographic regions and end markets. The idea was to provide a platform for the development of new products and a promise to deliver increased returns and shareholder value.
The details of the merger were set to give Clariant shareholders 52% and Huntsman shareholders 48% with a Board of Directors with equal representation. Global Headquarters would have been in Pratteln, Switzerland, with Operational Headquarters in The Woodlands, Texas. The new company would have had a dual stock exchange listing on the New York Stock Exchange and the SIX Swiss Exchange.
In the announcement, the merger was due to close by the end of 2017, subject to shareholder approval – and that is where the agreement began to unravel.
In July 2017, news reports started circulating about activist investors starting to derail the merger. Corvex Management and 40 North, an investment firm, made the announcement that they had purchased shares in Clariant and raised their combined stake to 7.2% to try to force Clariant to look for alternatives to the Huntsman merger. Hedge fund manager Keith Meister of White Tale, which is the investment vehicle of 40 North, aggressively increased the firm’s investment in Clariant to 15.2% during September 2017, while announcing plans to buy more stock ahead of a shareholder vote on the proposed merger.
White Tale representatives travelled to Switzerland to rally support from other shareholders ahead of the vote, while Clariant released a media campaign to show investors how beneficial the merger would be. Almost immediately, supporters of the merger began questioning whether it would pass due to the Clariant company law that needed a two-thirds majority to pass the motion. Supporters of the merger included Alex Roepers, CEO of Atlantic Investment Management, who noted that they would maintain a position in Clariant, but pointed out that despite White Tale’s 15% stake and efforts to block the deal, they had not presented any alternatives to the merger.
White Tale’s stance was that the merger would not deliver the promised benefits, expose Clariant to Huntsman’s debts, and weaken the company overall.
In a joint statement on October 27th, 2017, Clariant and Huntsman announced that the merger would be abandoned. While this could be chalked up as a win for activist investors led by White Tale, it may have exposed Clariant as a potential takeover target. White Tale is expected to take a seat on the board of Clariant as their now biggest shareholder.