Clariant $6.4bn takeover of Huntsman under attack

US investors say merger deal undervalues Clariant’s shares

Clariant chief executive Hariolf Kottmann and Huntsman chief executive Peter Huntsman. Photograph: Arnd Wiegmann/Reuters

Clariant chief executive Hariolf Kottmann and Huntsman chief executive Peter Huntsman. Photograph: Arnd Wiegmann/Reuters

 

Clariant’s planned $6.4 billion (€5.6 billion) takeover of Huntsman came under attack by two US investors who are pushing the Swiss chemicals manufacturer to explore alternatives to the six-week-old transatlantic deal.

Keith Meister’s activist hedge fund Corvex Management and 40 North, the investment firm run by David Winter and David Millstone, own about 23.9 million shares, or 7.2 per cent, of Clariant, the investors said in an emailed statement on Tuesday. The stake is held through a company called White Tale Holdings, now Clariant’s largest single shareholder, they said.

“We believe that the proposed merger significantly undervalues Clariant’s shares and that far more value could be created for shareholders through any number of alternative transactions,” the investors said.

Rationale

“The proposed merger has no strategic rationale and is in fact a complete reversal of the company’s long-standing strategy of becoming a pure-play specialty chemicals company.”

The move on Clariant is part of a growing wave of shareholder activism targeting European companies. Dan Loeb’s Third Point confirmed last month it has amassed a $3.5 billion holding in Nestlé, targeting Europe’s largest company by market value on the heels of hedge fund Elliott Management ’s bruising battle to get Dutch paint manufacturer Akzo Nobel NV in takeover talks with a rival. Activists, which traditionally focus on the US, have been drawn by surging equity markets in Europe and a stronger economic backdrop.

Clariant said it has had regular contact with the two hedge fund investors after they initially bought shares in the company last year. “As with all our shareholders, we maintain an open dialogue with them,” Jochen Dubiel, Clariant’s head of corporate communications, said.

Acquisition

The Huntsman acquisition was championed by Clariant chief executive officer Hariolf Kottmann, who is earmarked to become chairman of the combined company. Clariant agreed to buy Texas-based Huntsman in an all-stock deal unveiled in May that the companies described as a merger of equals. The plan was met with a lukewarm response from shareholders as the Swiss company, which had long been cited as a target itself, had attracted investors betting on a buyout.

“Clariant is the number-one takeover target in the sector, with a long list of interested parties,” Baader Helvea Equity research analyst Markus Mayer said in a note. The move by the US investors makes a counterbid scenario “more likely”.

Clariant should “fully explore all the strategic options” available to it, something that wasn’t “seriously” done before the deal with Huntsman, the US investors said. “Clariant will be exchanging almost half its shares for what is primarily a commodity and intermediates business which will further dilute its multiple and create a larger conglomerate discount.”

The Huntsman deal is expected to close at the end of 2017, pending approval from investors, including the former Sued Chemie family shareholders, who together hold a 14 per cent stake. – (Bloomberg)