Huntsman Corp. (HUN) is trading higher today after announcing it will merge with Switzerland-based Clariant in a merger of equals transaction. In case you're not familiar, both companies are major suppliers of chemicals.
Huntsman, which is based in the US, is a manufacturer of a wide variety of chemicals. It posted 2016 revenue of approximately $10 bln. Its chemical products number in the thousands and are sold worldwide to manufacturers serving a broad range of consumer and industrial end markets. The company has more than 100 manufacturing and R&D facilities in approximately 30 countries. It operates five distinct business divisions including the Pigments and Additives division which it intends to IPO as Venator Materials.
Clariant is a specialty chemical company, based in Muttenz near Basel/Switzerland. The company reports in four business areas: Care Chemicals, Catalysis, Natural Resources, and Plastics & Coatings. Clariant does not trade on the NYSE, but it trades on the SIX Swiss Stock Exchange under the symbol CLN. Clariant shareholders will own 52% of the combined company and HUN shareholders will own 48%.
The merged company will be named HuntsmanClariant. Both Boards of Directors unanimously approved the combination, which is classified as a merger of equals through an all-stock transaction. Huntsman shareholders receive 1.2196 shares in HuntsmanClariant for each Huntsman share (each existing Clariant share will remain outstanding as a share in HuntsmanClariant). On a pro forma 2016 basis, the combined company will be a major specialty chemical company with sales of approximately $13.2 bln, an adjusted EBITDA of $2.3 bln and a combined enterprise value of approximately $20 bln.
The combined company expects to realize approximately $400 mln in annual cost synergies. The full synergy run-rate will be achieved within two years of closing. These synergies will be realized by reducing operational costs and improving procurement. The targeted synergies represent roughly 3% of total combined 2016 revenue with one-time costs up to $500 mln.
Hariolf Kottmann, current Clariant CEO, will become Chairman of the Board of HuntsmanClariant. Peter Huntsman, current Huntsman CEO, will become CEO of HuntsmanClariant. Jon Huntsman, founder and Chairman of Huntsman, will become Chairman Emeritus and board member of HuntsmanClariant. The transaction is targeted to close by year end 2017. The global headquarters of HuntsmanClariant will be in Switzerland, but the operational headquarters will be in The Woodlands, Texas, where HUN is based now.
In sum, the two companies have been reportedly talking for some time with a potential deal heating up then cooling off. But the two companies were finally able to structure a deal they both like. The new company will be dual-listed on the SIX Swiss Exchange and the NYSE.