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Huntsman and Clariant to merge

5/22/2017
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Huntsman Corp. and Clariant have agreed to combine in an all-stock merger of equals to be named HuntsmanClariant. On a pro-forma 2016 basis, the combination will create a leading chemical company with sales of approximately $13.2 billion/year, adjusted EBITDA of $2.3 billion, and a combined enterprise value of approximately$20 billion. At press time, the combined company would have a market capitalization of $14 billion—Huntsman accounting for $6.48 billion and Clariant accounting for 7.34 billion Swiss francs ($7.53 billion). Clariant shares rose 6.6% on Monday at opening.

The transaction is targeted to close by year-end 2017. Clariant and Huntsman say they are confident that the required regulatory approvals can be obtained in a timely manner. The worldwide headquarters of HuntsmanClariant will be at Pratteln, Switzerland, and operational headquarters at The Woodlands, Texas. 

Under the terms of the deal, Huntsman shareholders will receive 1.2196 shares in HuntsmanClariant for each Huntsman share they own, and each existing Clariant share will become one share in HuntsmanClariant. Existing Clariant shareholders will own 52% of the new company and Huntsman shareholders will own 48%.

Under the announced deal, the combined company, incorporated in Switzerland, will be governed by a board of directors with equal representation from Clariant and Huntsman, and will follow Swiss corporate governance standards. Hariolf Kottmann, current Clariant CEO, will be chairman. Peter Huntsman, current Huntsman president and CEO, will become CEO.  Jon Huntsman, founder and chairman of Huntsman, will become chairman emeritus and board member of HuntsmanClariant. 

The combined entity will have a significantly improved growth profile in attractive end-markets and geographies, the companies say. It will leverage shared knowledge in sustainability and boast a much stronger joint innovation platform. This will enable the development of new products, to deliver superior returns and drive shareholder value, they say.
 
Huntsman said earlier this year that it was looking for merger partners after the separation of the company's pigments and additives business, to be known as Venator Materials. Venator's initial public offering is still expected in summer 2017. Huntsman and Clariant reportedly discussed a merger late last year but could not agree on terms, including who would lead the combined group. The merger has strong commitment from Clariant shareholders and Huntsman family shareholders, the companies say. The merged entity will be listed on the SIX Swiss Exchange and the New York Stock Exchange. HuntsmanClariant will use IFRS, and beginning in the first quarter of 2018 will report in US dollars and start filing 10Qs and 10Ks consistent with SEC requirements.

"Clariant and Huntsman are joining forces to gain much broader global reach, create more sustained innovation power, and achieve new growth opportunities," says Hariolf Kottmann, CEO of Clariant. "This is the perfect deal at the right time. This is in the best interest of all of our stakeholders. Peter Huntsman and I share the same strategic vision and I look forward to working with him."

The two companies say they expect to realize more than $3.5 billion of value creation from approximately $400 million in annualized cost savings, with the full savings achieved within two years of closing. These savings will be achieved by reducing operational costs and improving procurement. The targeted savings represent roughly 3% of total combined 2016 revenue, with one-time costs of up to $500 million. There will also be additional cash-tax savings, the companies say.

"I could not be more enthusiastic about this merger and look forward to working closely with Hariolf Kottmann, a man I have admired and trusted for the past decade," says Peter Huntsman, president and CEO of Huntsman. "We also look forward to a close association with his immensely talented colleagues around the world. Together, we will create a global leader in specialty chemicals with a combined balance sheet providing substantial financial strength and flexibility."

Citi and UBS are serving as Clariant's financial advisors for the transaction, with Homburger, and Cleary Gottlieb Steen and Hamilton serving as its legal advisors. BofA Merrill Lynch and Moelis & Co. LLC are serving as Huntsman's financial advisors for the transaction, with Kirkland & Ellis, Bär & Karrer, and Vinson & Elkins acting as its legal advisors.