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When McDo Meets Specialty Chemicals

22 May 2017 by lberuti

The company that produced the iconic foam clamshells that housed McDonald’s Big Macs and kept them warm could soon be based in Switzerland. After the mergers of Dow and DuPont, of Syngenta and ChemChina, and of Monsanto and Bayer, CLAR ( Clariant AG ) announced today a merger of equals with the Huntsman Corporation (it is not part of the 1000 most liquid entities in CDS and does not appear in Datagrapple). The all-stock operation will create a chemical giant worth round $14Bln, with corporate headquarters in Pratteln, Switzerland and operational headquarters in the US. In the recent past, both companies have struggled to bolster their revenues and they said the deal would result in cost savings of about $400mln a year, which the pair valued at $3.5Bln upfront. Investors took a more cautious approach and after an initial 10% jump, both stocks closed the day more or less flat. CLAR, which enters the tie-up with a stronger balance sheet (it has $1.5Bln debt vs Huntsman $3.8Bln), is willing to put at risk its investment grade rating (currently standing at BBB-) to gain access to the US market and of course to share a big cost cutting opportunity. Investors acknowledged the risk of merging with a far more leveraged entity, but only sent CLAR’s 5-year risk premium 6bps wider to 84bps. As part of the merger, the companies plan to IPO Venator, Huntsman’s Pigments and Additive business. Together with the expected synergies, it will certainly improve the credit metrics on the resulting entity.