Huntsman to merge with Swiss chemical firm in $14 billion deal

By John Rogers

Chemical manufacturing giant Huntman Corp., majority-owned by Utah's Huntsman family, has announced a merger with Switzerland’s Clariant AG. The new entity will have a market value of more than $14 billion and when debt is included, the value climbs to around $20 billion, according to a release from Clariant. The merger to create a global chemical specialties company was made after years of mutual approaches, the statement said.

To be known as HuntsmanClariant, the company will be 52 percent owned by Clariant shareholders with Huntsman shareholders holding the remainder. The announced transaction, described by the principals as a merger of equals, comes as the chemical industry looks for ways to cut costs and boost revenue.

Clariant chief executive Hariolf Kottmann and Huntsman CEO Peter R. Huntsman said they had developed a professional and personal friendship eight years ago, preceding intensified talks over the past five weeks that resulted in a combination of the two companies.

“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,” Huntsman said in the news release. “Together, we will create a global leader in specialty chemicals with a combined balance sheet providing substantial financial strength and flexibility.”

Kottmann called the merger 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,” he said. “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.”

Reuters reported in March that Clariant and Huntsman previously ended merger talks late last year over a disagreement about who would play the lead role.

Many European companies have been looking for merger and acquisition opportunities as growth in the chemicals industry has slowed, Reuters said. European businesses have particularly suffered, losing market share to rivals in Asia, where demand is growing faster, or to North America, where energy is cheaper.

“Hariolf and I had discussions as friends and as business colleagues. But this is the first time in all those years that we actually engaged our teams to actually get a deal done,” Huntsman said during a conference call announcing the merger.

The deal combines Clariant, a Pratteln, Switzerland-based maker of aircraft de-icing fluids, pesticide ingredients and plastic coloring, with Huntsman, whose chemicals are used in paint, clothing and construction.

Peter Huntsman will become CEO of the combined company while Kottmann will become chairman. The combined company will be headquartered in Switzerland, although its operational center will be in Woodlands, Texas, with Huntsman working from his office in Salt Lake City.

Jon Huntsman founded Huntsman Corp., which was focused on styrofoam packaging, with his brother in 1970. It now employs 15,000 people across a number of specialty chemical segments, including polyurethanes and advanced materials. Huntsman Sr. will be named chairman emeritus and director of HuntsmanClariant.

Chemical and Engineering News lists Huntsman Corp. as the 29th-largest chemicals company in the world, with revenues of $10 billion in 2016.

Kottmann has spent several years restructuring Clariant as business waned. He divested underperforming businesses, including textile and paper chemicals in 2012, and placed more responsibility with lower-level managers for faster decision-making. In mid-2015 he started carving out Clariant’s plastics and coatings business into a separately managed entity, CNBC reported.

Plastics and coatings will be an integral part of the new company, Kottmann said, though he reiterated that it could be sold to fund any further takeovers.

CNBC also said that investor pressure had been growing on management to identify a growth strategy for Clariant, which was formed in the mid-1990s from parts of Switzerland’s Sandoz and Germany’s Hoechst chemical companies.

CNBC quoted a source familiar with the transaction as saying that HuntsmanClariant would use its newly acquired fire power to pursue further deals. Kottmann said in the call with journalists that all of the businesses of the new enlarged entity would merit “strategic thinking.”

As evidence of the upheaval in the chemicals industry, European firms BASF, Solvay, Evonik and Lanxess have been targets of multi-billion-dollar takeovers since mid-2015. A $130 billion merger and three-way split between U.S. groups Dow and DuPont is underway, while industrial gases groups Linde and Praxair are seeking to combine.

The merger is scheduled to close by year-end, subject to Clariant and Huntsman shareholder approval, regulatory approvals and other expected closing conditions. Company principals said they foresee no roadblocks to finalizing the deal.