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White Tale Holdings opposes Huntsman & Clariant merger
22 Sep '17
4 min read
Courtesy: Huntsman
The board of Clariant, a world leader in specialty chemicals, has received a letter from White Tale Holdings, the Cayman Island-based vehicle created by hedge funds Corvex and 40 North, which says that White Tale has increased its stake in Clariant above 15 per cent. It also emphasises White Tale’s opposition to the merger between Huntsman and Clariant.
However, the board of directors of Clariant after carefully and diligently considering various strategic options during the last years remains deeply convinced that this combination in the form agreed in May 2017 is a perfect transaction at the right time to create substantial immediate and long-term shareholder value. It will accelerate the companies’ respective paths towards creating a global specialty chemicals leader.
The board said that the proposed merger was a continuation of Clariant’s strategy of becoming a world leader in specialty chemicals. The merger creates one of the largest global specialty chemicals groups, with an attractive, balanced and resilient portfolio across diverse industry segments and geographies, benefitting from a strong growth outlook and substantial exposure to attractive markets. Through proactive and consistent portfolio management, Huntsman’s portfolio has evolved and is evolving into a primarily specialty chemicals businesses and is, therefore, an excellent match for Clariant.
The terms of the proposed merger also do not undervalue Clariant's shares, it said.
The board clarified that the exchange ratio has been agreed on the basis of the respective share prices prevailing at the time of the announcement, reflecting the historic equity value proportion and is in line with a similarly strong track record of total shareholder return of both companies over the last years. In addition, the fairness, from a financial point of view, to Clariant, of the exchange ratio was confirmed with the assistance of Clariant's financial advisors.
The proposed merger offers substantial value creation to both sets of shareholders.
On top of the ambitious business plans of both companies over US$ 3.5 billion of value will be created through cost synergies in excess of US$ 400 million per annum. In addition to these cost synergies, tax synergies of US$ 25 million and approximately US$ 250 million additional organic revenues at approximately 20 per cent EBITDA margin will be realised thanks to the complementary product portfolios. More so, significant further future potential will result from strengthening common research and development platforms and projects. This substantial value creation is unmatched by any other viable alternative.
Whilst Clariant’s plastics and coatings business area has been earmarked for portfolio management since 2015, selling plastic and coatings as Clariant today would be value destructive in view of its significant cash contribution and cost coverage. Post consummation of the merger, the new company HuntsmanClariant will clearly have and use the greater flexibility of the enlarged Group to keep adjusting its portfolio to maximise value for its shareholders and build a leading specialty chemicals company.
Clariant has established a competitive cost structure in line with its peers despite significant research and development spend which forms the foundation for sustainable future growth. Any further cost cutting exercise will impair the company’s ability to compete in the future. US$ 300 million of stand-alone cost improvement as alleged by White Tale are neither sustainable nor in line with observed peer benchmarks.
In a merger of equals there is no ceding of operational control.
The new company will be jointly led by both management teams under Swiss Corporate Governance, domiciled and headquartered in Switzerland. Hariolf Kottmann will become chairman, Peter Huntsman will become CEO and Patrick Jany will become CFO of the new company. They will work together to deliver on their joint strategic vision for the merged company. (SV)
However, the board of directors of Clariant after carefully and diligently considering various strategic options during the last years remains deeply convinced that this combination in the form agreed in May 2017 is a perfect transaction at the right time to create substantial immediate and long-term shareholder value. It will accelerate the companies’ respective paths towards creating a global specialty chemicals leader.
The board said that the proposed merger was a continuation of Clariant’s strategy of becoming a world leader in specialty chemicals. The merger creates one of the largest global specialty chemicals groups, with an attractive, balanced and resilient portfolio across diverse industry segments and geographies, benefitting from a strong growth outlook and substantial exposure to attractive markets. Through proactive and consistent portfolio management, Huntsman’s portfolio has evolved and is evolving into a primarily specialty chemicals businesses and is, therefore, an excellent match for Clariant.
The terms of the proposed merger also do not undervalue Clariant's shares, it said.
The board clarified that the exchange ratio has been agreed on the basis of the respective share prices prevailing at the time of the announcement, reflecting the historic equity value proportion and is in line with a similarly strong track record of total shareholder return of both companies over the last years. In addition, the fairness, from a financial point of view, to Clariant, of the exchange ratio was confirmed with the assistance of Clariant's financial advisors.
The proposed merger offers substantial value creation to both sets of shareholders.
On top of the ambitious business plans of both companies over US$ 3.5 billion of value will be created through cost synergies in excess of US$ 400 million per annum. In addition to these cost synergies, tax synergies of US$ 25 million and approximately US$ 250 million additional organic revenues at approximately 20 per cent EBITDA margin will be realised thanks to the complementary product portfolios. More so, significant further future potential will result from strengthening common research and development platforms and projects. This substantial value creation is unmatched by any other viable alternative.
Whilst Clariant’s plastics and coatings business area has been earmarked for portfolio management since 2015, selling plastic and coatings as Clariant today would be value destructive in view of its significant cash contribution and cost coverage. Post consummation of the merger, the new company HuntsmanClariant will clearly have and use the greater flexibility of the enlarged Group to keep adjusting its portfolio to maximise value for its shareholders and build a leading specialty chemicals company.
Clariant has established a competitive cost structure in line with its peers despite significant research and development spend which forms the foundation for sustainable future growth. Any further cost cutting exercise will impair the company’s ability to compete in the future. US$ 300 million of stand-alone cost improvement as alleged by White Tale are neither sustainable nor in line with observed peer benchmarks.
In a merger of equals there is no ceding of operational control.
The new company will be jointly led by both management teams under Swiss Corporate Governance, domiciled and headquartered in Switzerland. Hariolf Kottmann will become chairman, Peter Huntsman will become CEO and Patrick Jany will become CFO of the new company. They will work together to deliver on their joint strategic vision for the merged company. (SV)
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