White Tale Increases Clariant Stake, Repeats Opposition to Huntsman Merger
Keith Meister - Corvex Management

White Tale Holdings, the activist hedge fund guided by Keith Meister, has upped its stake in Clariant AG (CLZNY)  and reiterated its objection to a proposed tie-up between the Swiss chemicals group and Texas-based Huntsman Corp. (HUN)

The fund, a combination of Meister's Corvex Management hedge fund and the 40 North Investment group run by David Winter and David Millstone, has consistently opposed the $20 billion tie-up with Huntsman, arguing the deal has "no strategic rationale" and is "a complete reversal of the company's longstanding strategy of becoming a pure-play specialty chemicals company."

White Tale now owns 50.1 million shares, the group said in a letter to the Clariant board published late Monday, at 15.1% stake that makes it the company's biggest shareholder. The fund wants Clariant's board to review the merger and look for alternative ways to add shareholder value before calling for a vote on the proposed deal. 

"We have attempted to work constructively with you and your advisors over the past two months, out of the public spotlight, to better understand the Board's questionable logic in pursuing Clariant's proposed merger with Huntsman," the letter stated. "Unfortunately, we remain convinced, and increasingly so, that the proposed merger is detrimental to Clariant shareholders. It both significantly destroys existing Clariant shareholder value and prevents Clariant from pursuing multiple alternative and immediate opportunities to unlock value for its shareholders."

When the proposed Clariant/Huntsman deal -- led by CEO Hariolf Kottmann -- was announced in May, it was described as a merger of equals, although Clariant was in fact acquiring its U.S. peer since the Pratteln, Switzerland-based chemicals maker ended up with 52% of its counterpart from Woodlands, Texas.

But the tie-up was nonetheless seen by some as a potential 'tax inversion', on the part of Huntsman, which would have the global operational hub in the U.S. and provide the CEO of the combined company, while Clariant would take the chairman's role and provide the corporate headquarters.

Switzerland's effective federal corporate tax rate is 7.8%, according to Deloitte, while U.S. rates are banded between 15% and 35%.

Others, including analysts at Barclays, said the deal is "primarily about scale". "Clariant's share of the targeted value creation of more than $3.5 billion from synergies is equivalent to some 25% of the company's market cap," the bank said.

Clariant shares gained 0.23% in the opening hour of trading in Zurich Tuesday to change hands at Sfr23.80 each, extending their 6-month gain to 24.7% and valuing the group at Sfr7.9 billion ($8.22 billion).

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