Friday, 28 July 2017

Clariant and Huntsman Corporation have presented a update on their planned merger. The preparations to create HuntsmanClariant are proceeding as planned with an unchanged closing targeted for December 2017/January 2018. The opposition of the merger by an US investor was not mentioned.

 

 

HuntsmanClariant merger on track. Source: Stefan Yang/Fotolia.com

 

 

HuntsmanClariant merger on track. Source: Stefan Yang/Fotolia.com

Both companies have agreed on a joint strategic direction for near- and long-term value creation based on continued focus on higher growth and higher margin businesses, expansion of existing strong downstream presence, reaping benefits of complementary product portfolios and breadth of reach to deliver an additional organic sales revenue growth of around 2% p.a. at approx. 20% EBITDA margin and delivering synergies in excess of $400m as well as the $25m tax savings. Recently, an investor had wanted to stop the merger by acquiring 10 % of Clariant's shares. The companies did not address this fact in their current statement.


Reaping complementarity benefits

The merger brings together two strong specialty chemicals businesses with similar EBITDA margins at 17.2%.According to the press release It would reap complementarity benefits between Performance Products, Care Chemicals and Natural Resources, which represent approx. 35% of HuntsmanClariant combined sales and hold a comprehensive surfactants portfolio in high-end niche markets globally. It will have meaningful opportunities for growth including cross-selling potential and new product applications. The companies believe that complementary assets and geographic fit will provide significant commercial opportunities and more global reach within established routes to market

Clear understanding of core segments

The portfolio management principles and capital allocation plans of the new company are fully aligned. There is a clear joint understanding of the combined company's future core segments and the direct majority of investments will be directed to growth areas and growth regions. The current downstream presence will be expanded by targeting formulation- and application-based segment niches as well as high-end composites, bespoke polyurethane (PU) systems, and costumer oriented and co-developed products.

 

Portfolio will be simplified

The existing presence in the adaptive chemical methylene diphenyl diisocyanate (MDI) and in chemical building blocks such as ethylene oxide (EO) and propylene oxide (PO) is to be further advanced in downstream urethane systems as well as downstream applications such as surfactants. The portfolio will be simplified. Complexity will be reduced while utilizing significant strategic flexibility to consider value creating add-on acquisitions and divestments. Plastics & Coatings and Textile Effects will be managed for cash and turnaround while all other businesses will be managed for growth and margins.