White Tale Appears Set to Succeed in Blocking Huntsman/Clariant Deal

Activist investor group White Tale appears set to succeed in blocking the Huntsman/Clariant deal, as it recently increased its own stake and a number of other Clariant shareholders support its view, it is understood.

White Tale’s recent roadshow with Clariant shareholders in London and Zurich was well received, and there were at least a dozen other shareholders expressing views against the deal, including long only funds, proprietary trading desks of big banks, and individuals.

A person close to White Tale said, “Its simple math once we get more than 25% of shareholders voting against the deal, the deal will be blocked.”

Further commenting on what next steps would be in the event of no deal, this person said: “We need an independent strategic review of all the options so that Clariant can show its shareholders it has tried to find the best solutions and buyers,” adding that, “There is a lot of interest.”

This person said that Clariant could sell its paint and coatings business at ten times EBITDA. “Clariant said that itself to investors many times,” the person added.

“White Tale will support the process if it will be done properly and Clariant will hire an independent adviser like Rothschild or Centerview who are very independent,” the person added.

A person familiar with Clariant’s position commented on recent news that White Tale has further increased its stake saying, “If White Tale has so much support for its point of view why does it need to do an investor roadshow and why does it need to increase its own stake in Clariant if it has the support of other shareholders as it claims it does?”

This person added: “Clariant has not spoken to a single shareholder that supports the White Tale point of view.”

On the rationale for the present deal, this person said: “Clariant held talks with other bidders before Huntsman … Evonik was a potential bidder for Clariant. But Evonik only wanted a unit of the company and not the whole company, and if Evonik was going to bid it would have done it when the share price was 19 Swiss francs.”

The person close to White Tale said, “Clariant says it has talked to Evonik and BASF in the past but there was never an auction. The company set too many bid guidelines and scared many potential bid partners. The CEO was insisting not to be in middle management by the end of his career, and conditions and restrictions such as that scared bidders away.”

White Tale sees significant value in the company, even if the price goes down once the Huntsman bid has failed. White Tale wants Clariant to refocus on “what it was doing last year,” namely concentrating on specialty chemicals, which should imply that the company could trade at 16- 19x EBITDA on a stand-alone basis, the person close to White Tale noted.

It is understood that Clariant already knows the deal will fail, but it has to be seen to be trying to proceed because of the contract and the break fee of $210 million. The break fee is $60 million if Clariant shareholders vote the deal down.

The source close to White Tale said that the investor had talked to Clariant investors all over the UK, Northern Europe, and Switzerland that own 1% or more and even some shareholders that are close to Clariant. White Tale wants them to know more about White Tale and Standard Industries and why they have teamed up with Keith Meister against the Huntsman deal.

The source said, “Standard Industries have been investors in Clariant for a year and believe in the focus it had as real specialty players which was their strategy before the Huntsman bid.”

A sector banker told CTFN that White Tale has a reason to increase its stake in Clariant because the larger the stake it has the more other shareholders will listen to them. The banker noted that Clariant did not solicit bids for the company, but that it is a business that has been seen as up for sale for a long time. “BASF and Evonik both looked at the company and had a long time to bid, but everyone just wants bits of the company not the whole. It’s a diverse company and White Tale wants to have the company broken up to sell it in bits. If White Tale keeps agitation up and it looks like they are going to succeed, Huntsman might have to find some way to sweeten the deal,” the banker suggested.

The person close to Clariant said, “Why should Clariant sell plastics and coatings when its 40% of their cash flow, the company wouldn’t survive? White Tale does want to sell Clariant in pieces, but this is not what we want and it’s not the best long term strategy for the company.”

The person ruled out any change in the terms of the transaction.

A Clariant spokesperson said, “The exchange ratio is not up for discussion. We have a binding agreement with Huntsman.”

The spokesperson added: “We are very confident to get the necessary two-third majority at the extraordinary general meeting. Despite White Tale no shareholder has announced a vote against the capital increase.”

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Rachel Rigby

Rachel Rigby

Rachel spent 12 years at Mergermarket, most recently as head of special coverage. Her role included liaising with European CEOs and reporting for dealReporter. Rachel’s various interests lie in the travel, media, clean energy, and healthcare sectors. As a journalist, she specializes in covering large private equity transactions and M&A. Rachel has worked on numerous high profile deals, including the Kraft takeover of Cadbury, the British Airways merger with Iberia, and the Newscorp stake in BSKYB. She has written articles for Sunday Business, Breaking Views, Media Week, Financial News, and appeared on CNBC. Rachel holds a liberal arts degree in European History from Smith College, Massachusetts.

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