ZURICH (Reuters) - Swiss specialty chemicals maker Clariant and U.S. group Huntsman abandoned their $20 billion merger on Friday, notching a win for activist investors who fought the deal for months on the grounds it would destroy shareholder value.

White Tale, the investment vehicle of hedge fund manager Keith Meister and New York-based fund 40 North, had raised its Clariant stake to above 20 percent, Reuters reported on Thursday ahead of the announcement the tie-up was dead.

White Tale’s rising stake, coupled with other Clariant shareholders who came out against the deal, left the Swiss company doubtful of mustering the two-thirds support necessary for the merger to go through.

The successful revolt comes amid a wave of investor activism in Switzerland, where Credit Suisse and Nestle both face demands for change.

Chief Executive Hariolf Kottmann said Clariant still had options to explore after further talks with White Tale, which had so far not presented the company with an alternative plan.

“To do a merger of equals ... is one option, to make a large transformational transaction is another option, to continue to stand alone is a third option,” Kottmann told reporters on a call where he vowed to remain CEO.

Some analysts said Clariant could become a bid target, though its shares fell about 5 percent on Friday.

“Clariant is again the No. 1 takeover target,” said Baader Helvea analyst Markus Mayer, who said bidders might wait until Clariant’s share price fell further, or to see if White Tale could install management more favorable to a takeover.

The collapse of the merger also poses a challenge for Huntsman’s founding family, which was set to hold a significant stake in the combined entity but could now struggle to play a role in a consolidating industry without losing influence.

‘SOMETHING MORE SHORT TERM’

Clariant and Huntsman in May struck an agreement that would have given Clariant 52 percent of the combined entity, saying the deal would produce around $400 million in annual cost synergies and create the world’s second-biggest specialty chemicals maker behind Evonik.

The logo of Swiss specialty chemicals company Clariant is seen at the company's headquarters in Pratteln, Switzerland August 9, 2017. REUTERS/Arnd Wiegmann

In fighting the Huntsman tie-up, Meister and 40 North’s David Winter and David Millstone contended the merger would not deliver enough benefits, while exposing Clariant to Huntsman’s debt and volatile commodity chemicals business.

Speculation the deal might fail had been mounting as even supporters sold down their stakes.

“I thought it was a fantastic deal,” said one investor, who sold out on fears White Tale was gaining the upper hand. “I think White Tale want something more short term.”

Alex Roepers, CEO of the $1.3 billion Atlantic Investment Management group, said he had sold the rest of his Clariant stake on Friday, locking in a 50 percent gain in under a year.

“As a stand-alone company, without the potential merger synergies and portfolio optimization, we regard Clariant as fairly valued at the current share price level,” he said, adding he would monitor Clariant for another attractive entry point.

Clariant shares had risen about 38 percent this year before Friday’s announcement but were still more cheaply rated than rivals, trading at a multiple of 18.7 times forecast earnings against an average 21.3 ratio of peers in the chemicals industry, according to Starmine data.

TAKEOVER TARGET

A source familiar with the acquisition strategy of Germany’s Evonik said it would potentially be interested in acquiring portions of Clariant should the Swiss company be broken up. Evonik declined to comment.

Two years ago, Evonik held talks with buyout group CVC over a potential joint offer for Clariant, although Kottmann has said he never received a formal bid.

“There were never serious discussions with another peer, where we were asked if we would divest ourselves, shop the company and be taken over,” Kottmann said.

Huntsman CEO Peter Huntsman said separately he was disappointed the merger with Clariant did not go through.

Clariant and Huntsman, which said its third-quarter costs linked to the merger were $18 million, agreed to forgo breakup fees. Clariant had faced a potential $210 million hit from walking away from the deal, and a $60 million fee if Clariant shareholders failed to approved the transaction.

Clariant, which had hired Goldman Sachs to try to rescue the merger, makes aircraft de-icer, retardant for wildfires, plastics colorings, chemicals to help oil drillers separate oil from water and ingredients for shampoos.

Kottmann said Clariant would sit down again with Meister, Millstone and Winter.

A White Tale spokesman said only it would seek talks with management before commenting. Previously it said it would accept a seat on Clariant’s board as biggest shareholder.

Konstantin Winterstein, a Clariant board member and one of the representatives of Bavarian families that own 14 percent of Clariant, had supported the merger and is sticking by Kottmann.

“Clariant’s development under the long engagement of Hariolf Kottmann and his team has been outstanding and remains well positioned to continue its successful course even without the merger,” Winterstein said.