Clariant and Huntsman Corporation have presented a first update on their planned merger, which indicates that Huntsman’s Textile Effects division’s long-term future is uncertain. According to a statement yesterday, the portfolio will be simplified, and Plastics & Coatings and Textile Effects will be managed for cash and turnaround while all other businesses will be managed for growth and margins.

The companies announced the decision to combine in a merger of equals through an all-stock transaction in May. The merged company will be named HuntsmanClariant. “This is 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,” said Hariolf Kottmann, CEO of Clariant. “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.”

The preparations to create HuntsmanClariant, a leading specialty chemicals company, are showing continued strong progress and are proceeding as planned, accoprding to the companies, with an unchanged closing targeted for December 2017 / January 2018.

Joint strategic direction

Clariant and Huntsman 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 around 20% EBITDA margin and delivering synergies in excess of US$ 400 million.

The merger brings together two strong specialty chemicals businesses with similar EBITDA margins at 17.2% (including synergies). It will reap complementarity benefits between Performance Products, Care Chemicals and Natural Resources, which represent around 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 explain.

“The complementary assets and geographic fit provide significant commercial opportunities and more global reach within established routes to market. Furthermore, HuntsmanClariant will take advantage of its broad asset base while continuing to move downstream into specialties and more differentiated applications. As a result of these complementary product portfolios and structures, additional organic sales revenues of around 2% p.a. at around 20% EBITDA margin have been identified.”

R&D and technological expertise

HuntsmanClariant's position as a leading specialty chemicals company will further benefit from complementary R&D and technological expertise, as well as shared knowledge in sustainability and cross-fertilization in innovation and technology capabilities, the companies reports.

The portfolio management principles and capital allocation plans of the new company are fully aligned. According to the statement, 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. 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.

Joint synergy implementation

The project team is progressing very well in terms of joint synergy implementation and has high confidence in meeting the synergy target in excess of US$ 400 million, as well as the US$ 25 million tax saving target. Key regulatory filings are submitted, including in the US, EU and China.

“The joint senior management team is committed to making HuntsmanClariant a success from day one,” the companies say. “It is a unique opportunity to combine the best of two cultures - Huntsman's entrepreneurship and efficiency and Clariant's innovation and business excellence. Both CEOs and executive teams are fully involved in post-merger integration planning and the great working spirit confirms the cultural fit between both organisations.”

www.clariant.com