Huntsman, Clariant Near Deal to Merge
All-stock deal would create chemicals company with market value of about $14 billion
Huntsman Corp. HUN 3.37% and Switzerland’s Clariant AG CLZNY 0.94% are near an agreement to merge in an all-stock deal that would create a chemicals giant worth about $14 billion as companies in the industry seek ways to cut costs and boost revenue.
No deal has been signed, Huntsman said, but terms being discussed call for Clariant shareholders to own about 52% of the new entity, and Huntsman investors to own the rest—based on their current values. Huntsman Chief Executive Peter Huntsman is to hold that title at the new company with Clariant CEO Hariolf Kottmann taking the chairman role. The new group, with board representation evenly split, is to be called HuntsmanClariant.
The deal, which was announced Monday, would create a trans-Atlantic company valued at about $20 billion including debt, offering a wide array of chemicals such as polyurethanes, pigments, automotive fluids, additives and resins that are used across industries ranging from aerospace to agriculture to household-cleaning.
Together Huntsman, which is based in Woodlands, Texas, and its Swiss-based rival would operate in well over 100 countries and employ about 32,000. Combined they would generate annual revenue of more than $13 billion.
The expected tie-up comes amid a period of consolidation in the chemicals industry as companies seek to cut costs by eliminating overlapping operations and products, and seek new sources of revenue by tapping new markets and customers. The deals are also meant to help the companies combine resources to bolster the research and development for new products.
“Combining our companies should give us more stable and steady earnings, increased margins and new growth opportunities,” Mr. Huntsman said in an interview. “For either side to get to a $20 billion enterprise value would take many many years of organic growth.” He added that the deal will “double our reach without stressing the balance sheet.”
Another benefit of the Huntsman-Clariant tie-up, Huntsman said, is a broader, more balanced geographic footprint. The so-called annual synergies from putting the companies together could reach $400 million.
U.S. paint and coatings maker PPG Industries Inc. is in a battle to acquire Dutch rival Akzo Nobel NV for $27 billion in cash and stock. Its advances have been repeatedly rebuffed, and the next week or so is expected to be crucial in determining whether the deal happens. Meanwhile Praxair Inc. and Germany’s Linde AG are trying to complete their merger to create the biggest industrial-gas player with a market value of more than $66 billion.
The lack of major revenue growth last year by Huntsman and Clariant demonstrated the challenging environment that the chemicals industry faces. Huntsman reported a 6% revenue decline to $9.66 billion in 2016, hurt in part by soft demand and difficulty raising prices for some products. The company’s additives and other performance-enhancing chemical products posted the biggest revenue decline both for the year and in the fourth quarter when competitive market conditions and lower average selling prices weighed on results.
Clariant fared better, posting revenue of 5.85 billion Swiss francs ($5.96 billion) last year, up 2% from the prior year. The company attributed that revenue gain to relatively strong growth in Asia, the Middle East and Africa, which helped to offset a weaker performance in North America, Europe and Latin America. The company said demand for higher-margin specialty industrial and consumer chemicals used in products such as laundry detergent and aircraft de-icing fluid was particularly strong.
Both companies’ shares have nevertheless performed well, helping set the stage for the merger, which came together in a matter of a few weeks after years of on-and-off discussions, a person familiar with the matter said. Each company had a market value of roughly $7 billion as of Friday.
The planned merger brings together two of the most recognized names in the chemicals industry. And both have incorporated deal making as a key part of their strategies to expand. Huntsman’s roots date back to 1970, when Jon Huntsman Sr. founded Huntsman Container Corporation. Since then, the company has made a series of acquisitions and joint ventures in Europe, India and China as part of its global expansion plans.
Clariant was formed in 1995, a spinoff from the chemical company Sandoz, whose history dates back to Basel in 1886. Clariant has also been an active acquirer, targeting acquisitions in the U.S. and Europe to broaden its portfolio of specialty chemicals.