Clariant/Huntsman to merge; creating a US$20 bn company

Swiss chemicals company Clariant and US-based Huntsman Corporation are to merge in a merger of equals through an all-stock transaction, with Clariant owning 52% of the new entity and equal board representation from both companies. The merged company will be named HuntsmanClariant.

On a pro forma 2016 basis, the combination of both companies will create a global speciality chemical company with sales of approximately US$13.2 billion, an adjusted EBITDA of US$2.3 billion and a combined enterprise value of approximately US$20 billion.

Early this year, Huntsman had said it was “looking seriously at the possibility of doing a merger or doing something” that would double or triple its revenue.

The combined entity will benefit from each other’s strengths and key markets such as the US and China. The transaction would give Clariant more sales in the US where fracking has provided chemical makers with cheap raw materials, and in China, where Huntsman generated 11% of its revenue last year.

The previously announced IPO of Huntsman’s Pigments and Additives business (Venator) is to continue as planned in summer 2017.

“This is the perfect deal at the right time. Clariant and Huntsman are joining forces to gain much broader global reach, create more sustained innovation power and achieve new growth opportunities,” said Hariolf Kottmann, CEO of Clariant.

Peter R. Huntsman, President/CEO of Huntsman, commented: “Together, we will create a global leader in specialty chemicals with a combined balance sheet providing substantial financial strength and flexibility.”

Highlights of the deal are:

A statement released says the new company will accelerate value creation for shareholders through a more robust combination of technology, products and talent. The combined company expects to realise more than US$3.5 billion of value creation from approximately US$400 million in annual cost synergies. The full synergy run-rate will be achieved within two years of closing. These synergies will be realised by reducing operational costs and improving procurement. The targeted synergies represent roughly 3% of total combined 2016 revenue with one-time costs up to US$500 million. There will also be additional cash-tax savings.

According to Bloomberg data, Clariant had gross profit of US$1.8 billion on sales of US$5.9 billion last year, with plastics and coatings accounting for 43% of revenue. Huntsman had US$1.7 billion of gross profit on US$9.8 billion of revenue, led by the polyurethanes division.

The transaction is targeted to close by year end 2017, subject to Clariant and Huntsman shareholder approvals, regulatory approvals and other customary closing conditions.

(PRA)