Swiss specialty chemicals maker Clariant (CLZNY) and Texas-based Huntsman Corp. (HUN) abandoned their $20 billion merger Friday, giving in to activist investors who had fought against the deal for months on the grounds that it would destroy shareholder value.
The deal would have created the world’s second-biggest specialty chemicals company, behind Germany’s Evonik. The two companies had first announced their plans to merge in May, in a deal that would have given Clariant 52 percent of the combined company.
White Tale, the investment vehicle of hedge fund manager Keith Meister and New York City-based fund 40 North, had increased its Clariant stake to more than 20 percent. White Tale, coupled with other Clariant shareholders who came out against the deal, left the Swiss company doubtful of mustering the two-thirds support necessary for the merger to go through.
The successful revolt comes amid a wave of investor activism in Switzerland, where Nestlé also faces demands for change from U.S.-based investors, while Credit Suisse is under attack from home-grown ones.
Meister and 40 North’s David Winter and David Millstone argued the merger wouldn’t deliver enough benefits (the companies had promised $400 million a year in extra operating efficiency), while exposing Clariant to the U.S. company’s debt and its volatile commodity chemicals business.
“It both significantly destroys existing Clariant shareholder value and prevents Clariant from pursuing multiple alternative and immediate opportunities to unlock value for its shareholders,” White Tale said last month.
Chief Executive Hariolf Kottmann said Clariant still had options to explore after further talks with White Tale.
To do a merger of equals … is one option, to make a large transformational transaction is another option, to continue to stand alone is a third option,” Kottmann told reporters on a call where he vowed to remain CEO.
“There are four or five of these options, and they have all pros and cons.”
Huntsman CEO Peter Huntsman said he was disappointed the transaction did not go through. His company has incurred around $18 million in merger-related costs. The two companies have, however, agreed to forego breakup fees.
White Tale did not immediately make a statement on Friday.