Huntsman and Clariant Are in Talks Toward a $14 Billion MergerBy and
Huntsman chairman had said in March he was looking for deal
Clariant has been expanding in higher-margin products
The U.S. and Swiss companies are discussing a deal in which Clariant would own about 52 percent of the new entity to be called HuntsmanClariant, according to the person, who asked not to be identified discussing the talks. Huntsman Chief Executive Officer Peter Huntsman would hold that title for the combined company and the board would be evenly split, with Clariant CEO Hariolf Kottmann as chairman. An announcement may come as soon as Monday.
An agreement between Huntsman and Clariant would add to an already historic level of deals in the industry as CEOs seek to bolster tepid sales growth with acquisitions. Global chemical companies have more than $300 billion in M&A planned, according to a report by AT Kearney published in March. That level is more than twice the previous all-time high set at the end of 2015, according to the management consulting firm.
Representatives of the companies didn’t immediately return calls for comment outside regular business hours. The talks were reported earlier by the Wall Street Journal.
The merged businesses could probably cut costs by $500 million a year, Hassan Ahmed, an analyst at Alembic Global Advisers said by phone. Clariant businesses such as plastics, coatings and personal care complement Huntsman divisions such as polyurethanes and performance products, he said.
The transaction would give Clariant more sales in North America, where fracking has provided chemical makers with cheap raw materials, and in fast-growing China, Ahmed said. Huntsman generated 11 percent of revenue in China last year.
Huntsman founder and Chairman Jon Huntsman has sought a large transaction since taking the company public in 2005. Hexion Specialty Chemicals, then a unit of Apollo Management LP, agreed to buy Huntsman in July 2007 for $6.5 billion but withdrew the offer a year later amid declining chemical markets. Clariant was mentioned by analysts as a potential partner after Jon Huntsman in March said the company was considering a major deal following the separation of its paint-pigments business.
The chairman said in a March interview that Huntsman was “looking seriously at the possibility of doing a merger or doing something that would double or triple our revenues.”
Huntsman surged in October after detailing plans to spin off the unit that makes titanium dioxide, or TiO2, a white pigment with volatile earnings that had depressed the stock price. Huntsman plans to sell shares in the pigment company, to be called Venator Materials Plc, through a mid-year initial public offering.
A deal would more than compensate for the pigment sales that will soon be spun off, Ahmed said.
“This diversifies them and gives them some heft,” the analyst said.
Huntsman shares have gained 40 percent this year, giving the company a market value of $6.4 billion. Clariant has climbed 19 percent, boosting its value to 6.9 billion Swiss francs ($7.1 billion).
Clariant is tapping growing demand for high-margin ingredients used in consumer-care products. Kottmann is upgrading the portfolio by making acquisitions, selling commodity chemical assets and innovating in areas such as cosmetic ingredients, oil-drilling chemicals and catalysts. The focus has fueled a steady rise in profit margin over the past six years. The Muttenz, Switzerland-based company had gross profit of $1.8 billion on sales of $5.9 billion last year, with plastics and coatings accounting for 43 percent of revenue, according to Bloomberg data.
Huntsman had $1.7 billion of gross profit on $9.8 billion of revenue, led by the polyurethanes division, which makes products used in seat padding and insulation. The company is based in Salt Lake City, where Jon Huntsman works, and run from The Woodlands, Texas, where his son Peter Huntsman is based.
Jon Huntsman left Dow Chemical Co. almost a half-century ago to start his own company, eventually founding the predecessor to Huntsman Corp.