Huntsman / Clariant: Is a Counterbid for Clariant Likely?

CEO, Manalo LLP

Roderick Manlo

Manalo LLP

We provide event driven research services to hedge fund managers and institutional investors that cover select definitive and pre-announced M&A deals, focusing on identifying and analysing the key upside and downside risks to a particular transaction. We primarily analyse $billion+ takeovers or mergers of publicly-traded European targets, but also look at deals globally to assess when there is a key European angle or aspect that can influence the deal outcome.

With over 16 years’ experience in risk arbitrage and investment banking, we specialise in providing research and advisory services on all facets of risk arbitrage, with particular expertise in:

- Cross-Border M&A
- Hostile Takeovers
- Local Takeover Codes
- Antitrust & Competition
- Financial Valuation
- Shareholder Vote Analysis
- Impacts of Precedent Transactions
- Risk Arbitrage Trading Strategies

Event-Driven

In a statement made public on 4-Jul-17, two Clariant investors, now controlling 10.1% of the company, spoke out against the pending Huntsman / Clariant merger.<a href="#_edn1" target="_blank">[i]</a> White Tale Holdings is now Clariant’s single largest shareholder and the consortium consists of Corvex Management, an activist hedge fund, and 40 North, the investment business of privately-held industrial company Standard Industries. White Tale’s aim is to disrupt Huntsman / Clariant, as an “alternative transaction”, in their view, is a more attractive strategy for Clariant.Here, we review the anomalies of M&amp;A “acquirer” activism, review the one-page statement by White Tale, assess the strong message sent by surpassing the 10% threshold and consider the power of these shareholders to scuttle the deal. We believe that White Tale’s success depends on Clariant’s board’s willingness to consider any proposed alternative transactions, after having spent years considering a merger-of-equals where management is ensured to be jointly in control. If White Tale acquires more share or builds a roster of dissident shareholders to threaten the 2/3 vote threshold, this puts the transaction in jeopardy and may pressure Clariant to: 1) consider lowering the deal consideration (unlikely); 2) offer an incentive such as a special dividend to Clariant shareholders only, to vote in favour of the deal (possible); or, 3) be slightly more receptive to a competing offer (albeit aware of the no-solicitation clause in the merger agreement).Otherwise, the alternative outcome is that Clariant’s board will push back, actively round up its own long-standing shareholders to actively show up at the EGM to support the merger, and stress that the board has run the company very well, to the tune of a +149% stock price appreciation over the past five years (20.0% annualised). In this case, White Tale will be unsuccessful in getting Clariant to withdraw from its agreed merger and the funds will be left searching for a white knight and voting ‘no’ at the EGM.

In a statement made public on 4-Jul-17, two Clariant investors, now controlling 10.1% of the company, spoke out against the pending Huntsman / Clariant merger.[i] White Tale Holdings is now Clariant’s single largest shareholder and the consortium consists of Corvex Management, an activist hedge fund, and 40 North, the investment business of privately-held industrial company Standard Industries. White Tale’s aim is to disrupt Huntsman / Clariant, as an “alternative transaction”, in their view, is a more attractive strategy for Clariant.Here, we review the anomalies of M&amp;A “acquirer” activism, review the one-page statement by White Tale, assess the strong message sent by surpassing the 10% threshold and consider the power of these shareholders to scuttle the deal. We believe that White Tale’s success depends on Clariant’s board’s willingness to consider any proposed alternative transactions, after having spent years considering a merger-of-equals where management is ensured to be jointly in control. If White Tale acquires more share or builds a roster of dissident shareholders to threaten the 2/3 vote threshold, this puts the transaction in jeopardy and may pressure Clariant to: 1) consider lowering the deal consideration (unlikely); 2) offer an incentive such as a special dividend to Clariant shareholders only, to vote in favour of the deal (possible); or, 3) be slightly more receptive to a competing offer (albeit aware of the no-solicitation clause in the merger agreement).Otherwise, the alternative outcome is that Clariant’s board will push back, actively round up its own long-standing shareholders to actively show up at the EGM to support the merger, and stress that the board has run the company very well, to the tune of a +149% stock price appreciation over the past five years (20.0% annualised). In this case, White Tale will be unsuccessful in getting Clariant to withdraw from its agreed merger and the funds will be left searching for a white knight and voting ‘no’ at the EGM.

Huntsman / Clariant: M&A "Acquirer" Activism - Can Corvex and 40 North Disrupt?

Huntsman Corp

Huntsman / Clariant: M&A "Acquirer" Activism - Can Corvex and 40 North Disrupt?