Activist Investors Corvex, 40 North Seek to Derail $20 Billion Merger Between Clariant AG (VTX:CLN) and Huntsman Corp. (NYSE:HUN)

Activist investors Corvex Management LP and 40 North Management LLC want Clariant AG (VTX:CLN) to reconsider its planned $20 billion merger with U.S. firm Huntsman Corp. (equals) after disclosing a combined 7.2% stake in the Swiss chemical maker.

Carl Icahn protégé Keith Meister serves as managing partner and chief investment officer of Corvex, and manages $6 billion in assets. 40 North, meanwhile, is a unit of U.S. conglomerate Standard Industries Inc. and is run by investors David Winter and David Millstone.

A spokesman for White Tale Holdings, a vehicle that the funds established as the consolidated owner, said there are plenty of opportunities to unlock value from Clariant’s current operations.

“Unfortunately, we do not believe that the proposed merger with the Huntsman Corporation is one of those options.”

A Clariant spokesman, meanwhile, acknowledged the increased investment of the two funds as well as their demands, noting that the company maintains an open dialogue with them.  Huntsman has yet to respond.

Merger of Equals

Clariant and Huntsman announced their merger to create a leading global chemical company in May.  Under the all-stock transaction, Clariant shareholders will hold 52% of the combined entity, while Huntsman stockholders will own 48%.  The new company will be known as HuntsmanClariant and will have listings in Switzerland and New York.  The merger, on a pro-forma 2016 basis, will establish a company with approximately $13.2 billion in sales and an adjusted EBITDA of $2.3 billion and a combined enterprise value of about $20 billion, with annual costs synergies of more than $400 million.

The boards of both companies unanimously approved the agreement, which is expected to close by the end of 2017. Corvex and 40 North, however, believe the transaction lacks strategic rationale and may put a dent on Clariant’s plans to become a pure-play specialty chemicals firm.

“Shareholders ought to reject this value destructive merger,” the White Tale spokesman added.

Counter Bid Likely

The move by Corvex and 40 North makes a counteroffer more likely, according to analysts at Baader Helvea Equity Research.

“As we have often stated, Clariant is the No. 1 takeover target in the sector, with a long list of interested parties,” the analysts said in a research note.

German chemical firms Evonik Industries and Lanxess have pursued Clariant in the past, and BASF, the world’s largest chemical producer, could also be interested.  Martin Lehmann of Swiss-based fund 3V Asset Management AG, which lists Clariant as one of its top holdings, also said the chemical maker is an attractive target.

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