ZURICH (Reuters) – Swiss specialty chemical compounds maker Clariant and U.S. group Huntsman deserted their $20 billion merger on Friday, notching a win for activist traders who fought the deal for months on the grounds it could destroy shareholder worth.
White Story, the funding automobile of hedge fund supervisor Keith Meister and New York-based fund 40 North, had raised its Clariant stake to above 20 %, Reuters reported on Thursday forward of the announcement the tie-up was lifeless.
White Story’s rising stake, coupled with different Clariant shareholders who got here out towards the deal, left the Swiss firm uncertain of mustering the two-thirds assist vital for the merger to undergo.
The profitable revolt comes amid a wave of investor activism in Switzerland, the place Credit score Suisse and Nestle each face calls for for change.
Chief Govt Hariolf Kottmann mentioned Clariant nonetheless had choices to discover after additional talks with White Story, which had up to now not introduced the corporate with another plan.
“To do a merger of equals … is one choice, to make a big transformational transaction is an alternative choice, to proceed to face alone is a 3rd choice,” Kottmann instructed reporters on a name the place he vowed to stay CEO.
Some analysts mentioned Clariant might develop into a bid goal, although its shares fell about 5 % on Friday.
“Clariant is once more the No. 1 takeover goal,” mentioned Baader Helvea analyst Markus Mayer, who mentioned bidders may wait till Clariant’s share worth fell additional, or to see if White Story might set up administration extra favorable to a takeover.
The collapse of the merger additionally poses a problem for Huntsman’s founding household, which was set to carry a major stake within the mixed entity however might now battle to play a task in a consolidating trade with out shedding affect.
‘SOMETHING MORE SHORT TERM’
Clariant and Huntsman in Could struck an settlement that might have given Clariant 52 % of the mixed entity, saying the deal would produce round $400 million in annual price synergies and create the world’s second-biggest specialty chemical compounds maker behind Evonik.
In combating the Huntsman tie-up, Meister and 40 North’s David Winter and David Millstone contended the merger wouldn’t ship sufficient advantages, whereas exposing Clariant to Huntsman’s debt and risky commodity chemical compounds enterprise.
Hypothesis the deal may fail had been mounting as even supporters offered down their stakes.
“I assumed it was a implausible deal,” mentioned one investor, who offered out on fears White Story was gaining the higher hand. “I believe White Story need one thing extra quick time period.”
Alex Roepers, CEO of the $1.three billion Atlantic Funding Administration group, mentioned he had offered the remainder of his Clariant stake on Friday, locking in a 50 % achieve in below a yr.
“As a stand-alone firm, with out the potential merger synergies and portfolio optimization, we regard Clariant as pretty valued on the present share worth stage,” he mentioned, including he would monitor Clariant for one more engaging entry level.
Clariant shares had risen about 38 % this yr earlier than Friday’s announcement however have been nonetheless extra cheaply rated than rivals, buying and selling at a a number of of 18.7 instances forecast earnings towards a median 21.three ratio of friends within the chemical compounds trade, based on Starmine knowledge.
A supply accustomed to the acquisition technique of Germany’s Evonik mentioned it could probably be serious about buying parts of Clariant ought to the Swiss firm be damaged up. Evonik declined to remark.
Two years in the past, Evonik held talks with buyout group CVC over a possible joint supply for Clariant, though Kottmann has mentioned he by no means obtained a proper bid.
“There have been by no means severe discussions with one other peer, the place we have been requested if we’d divest ourselves, store the corporate and be taken over,” Kottmann mentioned.
Huntsman CEO Peter Huntsman mentioned individually he was disillusioned the merger with Clariant didn’t undergo.
Clariant and Huntsman, which mentioned its third-quarter prices linked to the merger have been $18 million, agreed to forgo breakup charges. Clariant had confronted a possible $210 million hit from strolling away from the deal, and a $60 million payment if Clariant shareholders didn’t authorised the transaction.
Clariant, which had employed Goldman Sachs to rescue the merger, makes plane de-icer, retardant for wildfires, plastics colorings, chemical compounds to assist oil drillers separate oil from water and components for shampoos.
White Story didn’t instantly make an announcement, though Kottmann mentioned Clariant would sit down once more with Meister, Millstone and Winter. White Story beforehand mentioned it could settle for a seat on Clariant’s board as greatest shareholder.
Konstantin Winterstein, a Clariant board member and one of many representatives of Bavarian households that personal 14 % of Clariant, had supported the merger and is sticking by Kottmann.
“Clariant’s improvement below the lengthy engagement of Hariolf Kottmann and his workforce has been excellent and stays properly positioned to proceed its profitable course even with out the merger,” Winterstein mentioned.
Extra reporting by Maiya Keidan in London, Matthias Inverardi in Duesseldorf and Ludwig Burger in Frankfurt; Enhancing by Michael Shields, David Holmes and Mark Potter