Huntsman to go at it alone after $15B merger collapses

Huntsman CEO Peter Huntsman talks about his company on Monday, Oct. 24, 2016, in Woodlands. ( Elizabeth Conley / Houston Chronicle ) Huntsman CEO Peter Huntsman talks about his company on Monday, Oct. 24, 2016, in Woodlands. ( Elizabeth Conley / Houston Chronicle ) Photo: Elizabeth Conley, Staff Photo: Elizabeth Conley, Staff Image 1 of / 1 Caption Close Huntsman to go at it alone after $15B merger collapses 1 / 1 Back to Gallery

After a dramatic fight with activist investors that led to the scuttling Friday of a $15 billion chemicals mega merger, The Woodlands' Huntsman Corp. is now preparing for a much more methodical drive to reduce debt and increase its value.

It's just not as sexy when your primary stated goal as a company is to earn an investment grade bond rating from ratings agencies after slicing off enough debt. The combined HuntsmanClariant may never come to fruition, but CEO Peter Huntsman said he still feels great about the company his father founded continuing to thrive as a standalone specialty chemicals giant.

"I'd be less than an honest if I did not say this was a disappointment for both companies," said Peter Huntsman, arguing its a shame that a couple of shareholders can succeed in collapsing a deal.

But, he said, "I've never been more excited about the future of our company," contending Huntsman is performing well and will keep growing. For instance, Huntsman's third-quarter revenues jumped almost 20 percent from last year and its net income more than doubled.

Still, that doesn't take away from the surprise of a small group of investors being able to increase their ownership stake in Swiss-based Clariant from about 10 percent to more than 20 percent, giving them enough influence to kill the deal. Huntsman and Clariant opted to walk away rather than fight a prolonged losing battle.

RELATED: Shareholder opposition sinks Huntsman-Clariant merger

Peter Huntsman has said in recent interviews that he believes the specialty chemical sector will consolidate further, and that Huntsman needed the scale to compete with state-backed giants in China and elsewhere. Now, he argues that such growth isn't absolutely necessary and that Huntsman won't rush into another deal just for the sake of growth.

"It would have to be almost the deal of the century," Huntsman said. "I think the merger with Clariant was truly a unique opportunity."

It is through Clariant that White Tale Holdings - a partnership of New York firms Corvex Management and 40 North - now owns more than 20 percent as its largest shareholder, increasing its stake from more than 10 percent just a few months ago.

The White Tale opposition is led by Corvex's founder, Keith Meister, a protégé of famed corporate raider Carl Icahn, who has said he remains "increasingly" convinced the merger would dilute Clariant's value. He's spoken in favor of Clariant sticking to its specialty chemical strengths, cutting costs and selling off other parts.

Corvex was founded by Meister in 2010. In recent years, he's also urged Huntsman to sell off some of its parts. In another energy sector feud, Meister and another activist resigned from the board of directors of pipeline giant Williams Cos. after failing to oust the Williams CEO.

Meister, whose hedge fund once held a sizable stake in Huntsman Corp., opposed the company's 2014 purchase of more than $1 billion in titanium dioxide plants that make pigments. The deal went through but proved ill-timed as the pigments sector fell deeper into a downturn from which it only recently recovered.

However, Huntsman recently spun off most of those pigments assets into the publicly traded Venator Materials this summer. The stock has risen nearly 25 percent since its initial public offering. Venator is Latin for "hunter" - a play off of the Huntsman family name.

Investor activism has continued to grow in the sector and throughout much of Wall Street, but Huntsman isn't affected too much internally. Huntsman's biggest outside investor is the large fund manager Vanguard Group, which typically is much more of a passive investor, and owns a nearly 10 percent stake.