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Huntsman (HUN) & Clariant Ink All-Stock Merger Agreement

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Chemical companies, Huntsman Corporation (HUN - Free Report) and Clariant AG entered into a definitive agreement to combine in an all-stock deal that will create a leading chemical specialty company with revenues of roughly $13.2 billion and enterprise value of about $20 billion. This merger of equals will create a formidable industry player that will help the companies grow its foothold in high-growth markets, cut operating costs and expand margins.
 
The merged entity will be named HuntsmanClariant. Per the terms of the agreement, while Huntsman’s shareholders will hold 48% interest in the merged entity, Clariant will hold 52% interest. Huntsman’s shareholders will receive 1.2196 shares in the combined entity in exchange for each share. The board of directors will be represented equally by both companies.

The merged entity will leverage shared knowledge in sustainability and joint innovation platform, enabling the development of new products to drive shareholders’ value and deliver superior returns. The merged entity will speed up value creation for shareholders through robust combination of products, technology and talent. This will translate into annual cost synergies of approximately $400 million and generate over $3.5 billion in value creation.

The company expects full synergy to be achieved within two years after the completion of the deal. The synergies will be realized in the form of improved procurement and operational costs. The targeted synergies represent about 3% of combined revenues for 2016, including one-time costs up to $500 million. There will also be additional cash-tax savings.

The transaction is expected to close by the end of this year, subject to shareholders and regulatory approvals and other customary closing conditions.

Huntsman’s shares have rallied 18.4% in the last three months, outperforming the Zacks categorized Chemicals-Diversified industry’s dip of 0.3%.



Huntsman recorded a net income of $76 million or 31 cents per share in first-quarter 2017, up 35.7% from $56 million or 24 cents per share it earned a year ago. Barring one-time items, the adjusted earnings per share were 57 cents for the reported quarter, beating the Zacks Consensus Estimate of 38 cents.

Revenues for the quarter increased 4.8% year over year to $2,469 million, surpassing the Zacks Consensus Estimate of $2,448 million.

The company witnessed positive business development during the first quarter and the performance of almost all the business segments exceeded quarterly expectations. Huntsman is committed to separating the Pigments and Additives business (known as Venator) and it is planning a spin or IPO (initial public offering) this upcoming summer. Based on the strong first quarter performance, the company has improved outlook for the remaining year. It is also expected to generate free cash flows of over $450 million in 2017.

Huntsman Corporation Price and Consensus

 

Huntsman Corporation Price and Consensus | Huntsman Corporation Quote

Huntsman currently sports a Zacks Rank #1 (Strong Buy).

Other Stocks to Consider

Other top-ranked companies in the basic materials space include Kronos Worldwide Inc. (KRO - Free Report) , Akzo Nobel NV (AKZOY - Free Report) and ArcelorMittal (MT - Free Report) . All the three stocks sport a Zacks Rank #1. You can see the complete list of today’s Zacks Rank #1 stocks here.

Kronos has an expected long-term earnings growth of 5%.

Akzo Nobel has an expected long-term earnings growth of 11.1%.

ArcelorMittal has an expected long-term earnings growth of 11.4%.

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