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Clariant Discusses Shareholder Talks, Strategy

Wednesday, November 29, 2017

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On Friday, (Nov. 24) specialty chemicals firm Clariant (Muttenz, Switzerland) released multiple statements on the fallout of its terminated merger with Huntsman Corporation (The Woodlands, Texas), detailing a meeting with activist shareholder White Tale and the direction of the company’s growth strategy.

White Tale History

Representatives of Clariant’s Chairman and Nomination Committee met with the Cayman Islands-based holding company earlier last week in an effort to “identify possible ways to work together following the mutual termination of the merger agreement between Clariant and Huntsman.”

Huntsman

On Friday, (Nov. 24) specialty chemicals firm Clariant released multiple statements on the fallout of its terminated merger with Huntsman Corporation, detailing a meeting with activist shareholder White Tale and the direction of the company’s growth strategy.

The termination of that $20 billion merger plan was announced on Oct. 27, after White Tale articulated its dissent on the merger in July and grew its stock in the company to more than 15 percent in September.

The holding company is a joint venture of New York investment firm 40 North and hedge fund Corvex Management, and said that the merger had “no strategic merit” and undervalued Clariant while overvaluing Huntsman. They went on to express concerns that Clariant would cede operational control to Huntsman, “demonstrating a severe lack of due diligence with regard to Huntsman’s operational track record.”

Clariant said at the time that the merger would create more than $3.5 billion in value through cost and tax synergies and complementary product portfolios, and noted that while Huntsman’s president and CEO, Peter Huntsman, would become CEO of the new company, there would be no ceding of operational control along with the deal.

It was only after White Tale reportedly increased its stake to more than 20 percent did Clariant waiver, fearing that a shareholder vote on the deal would not result in the two-thirds “yes” votes needed to move forward.

New Developments

At the meeting last week, Clariant says that White Tale did not present its own strategy on growing Clariant’s value but instead repeated its request for the hiring of another investment bank to conduct a strategic review.

Market commentary platform Bloomberg Gadfly reported on the talks, explaining that Clariant’s current advisors are Citigroup and UBS—large banks that White Tale allegedly perceives as a conflict of interest.

However, Clariant doesn’t accept that the motive for the new advisor request is this clear.

“White Tale repeated its request to hire yet another investment bank to conduct a strategic review process,” the company’s statement reads. “Specifically, the Board of Directors perceives this process to be merely focused on finding bidders for various businesses with the ultimate consequence of break-up [sic] the company and selling the assets.”

Indeed, Bloomberg reports on the White Tale theory that, if Clariant sold its Plastics and Coatings division, it could focus on Specialty Chemicals, which is in line with the company’s bigger picture. The argument continues that, after a potential sale, Clariant could either return those proceeds to shareholders or use it to swallow up a different specialty chemicals target.

“The difference of opinion seems to be that Clariant would prefer to bulk up first before shrinking, rather than sell the operation without having a good idea of how to use the proceeds,” says Bloomberg’s Chris Hughes.

Clariant

At the meeting last week, Clariant says that White Tale did not present its own strategy on growing Clariant’s value but instead repeated its request for the hiring of another investment bank to conduct a strategic review.

Clariant’s Board of Directors unanimously rejected the idea.

“This, however, does not align with the entrepreneurial vision, understanding, corporate responsibility and the fiduciary duties of Clariant's Board of Directors and its management to create long-term and sustainable value for all stakeholders and to further develop the company's leading position in the specialty chemicals industry,” the company said

Instead, Clariant offered White Tale a few options. One: the option to initiate a registration process to propose one additional member into the Board at the next general meeting, which is slated for March 2018. Two: The Board has again offered White Tale the opportunity to sign a non-disclosure agreement that would allow them more insight into Clariant’s strategy.

Updated Strategy

Regardless of what White Tale’s response is to those decisions, Clariant has moved forward with its growth strategy, which the company says now has to be accelerated in the wake of the dumped Huntsman deal.

“Clariant's management is fully aware that the new situation following the termination of the merger will require additional efforts to update the strategy which will now be implemented on an accelerated basis,” the company said.

The Board approved the Executive Committee's plan to define a concrete set of measures, including M&A activities, short-term portfolio management options, potential returns to shareholders, a thorough review of the cost base and the pursuit of additional growth opportunities, to enhance value creation.

The company said it will announce details in the beginning of next year, before the general meeting. It also noted that this plan has the support of the Süd-Chemie legacy shareholders, representing approximately 15 percent of the outstanding shares, as well as the majority of institutional shareholders.

   

Tagged categories: Business matters; Clariant; Huntsman; Mergers

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