Swiss, US chemical giants set up $9b merger

Move to form HuntsmanClariant is latest in wave of deals in global chemical industry

NEW YORK • Swiss giant Clariant has agreed to buy Huntsman Corp for about US$6.4 billion (S$9 billion) in an all-stock deal valuing the United States company at about the same amount, extending a record run in transactions in the global chemicals industry.

Huntsman holders will get 1.22 shares in the new company, to be called HuntsmanClariant, for each share they own, with Clariant emerging with a 52 per cent stake, the two companies said in a statement yesterday.

The combination is expected to generate more than US$400 million in annual cost savings, leading to US$3.5 billion in value creation, they said.

The agreement between Huntsman and Clariant will add to an already historic level of deals in the industry as chief executives seek to bolster tepid sales growth with acquisitions. Global chemical companies have more than US$300 billion in mergers and acquisitions planned, according to a report by consulting firm AT Kearney published in March. That level is more than twice the previous all-time high set at the end of 2015.

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"The merger has been the subject of speculation for over a decade. We are glad that it finally came to the resolution," Vontobel analyst Victoria Kruchevska said in a note yesterday. "The merger will benefit Clariant as it will further expand its global footprint, in particular, in strategically important US and China markets."

Huntsman CEO Peter Huntsman said he and counterpart Hariolf Kottmann formed a rapport over the years as each undertook a deep overhaul of their respective companies to offset heightened competition from Asia.

Since taking the helm of Clariant in 2008, Mr Kottmann has defiantly resisted the overtures of other competitors, including Evonik Industries. As he prepares to become chairman of HuntsmanClariant, Mr Kottmann said it was not necessary to insist on being CEO in this merger, and talks suddenly advanced a couple of weeks ago after years of discussion.

WIDER REACH

The merger will benefit Clariant as it will further expand its global footprint, in particular, in strategically important US and China markets.''

VONTOBEL ANALYST VICTORIA KRUCHEVSKA

The breakthrough came as an unparalleled wave of deals in chemicals - including Dow Chemical's merger with DuPont - strengthened the position of competitors around Clariant and Huntsman.

Rivalry in both their commodity segments, such as pigments and leather chemicals, meant the companies struggled with profitability, leading to asset sales, plant closures and divestments.

The merger should strengthen earnings before interest, depreciation and amortisation margins to more than 20 per cent.

Clariant businesses such as plastics, coatings and personal care complement Huntsman divisions such as polyurethanes and performance products.

The new entity's global headquarters will be in Pratteln, Switzerland, and its operational headquarters will be in Texas.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on May 23, 2017, with the headline 'Swiss, US chemical giants set up $9b merger'. Print Edition | Subscribe