Cold feet have stopped a hot merger between Swiss chemical giants Clariant AG and Ciba Specialty Chemicals AG.
The firms called the deal off Dec. 9. They issued identical news releases citing ``commercial, financial, legal and regulatory risks and constraints'' as reasons for ending merger negotiations.
Each company's board of directors determined those risks would have undermined benefits of the planned merger, which was announced exactly one month earlier. The risks were determined during ``a period of extensive due diligence,'' the firms said.
Each board determined it was best to remain independent at this time, but said merger negotiations were ``constructive and open.''
Clariant spokesman Karl Hans Koenig said the companies had not begun formal merger work. Koenig declined to identify which segments of the business were considered to be regulatory risks.
Stan Sherman, president and chief executive officer of Ciba North America, said it was difficult to assess what role plastics or any business unit played in the decision not to merge.
``In a deal this size, no one item is a deal-breaker,'' he said in a Dec. 10 telephone interview from Tarrytown, N.Y. ``I feel good that senior management at both companies had the courage to bite the bullet and move ahead after deciding the merger wouldn't work.''
Clariant of Muttenz, Switzerland, and Ciba of Basel, Switzerland, rank No. 1 and No. 2, respectively, in global sales of specialty chemicals. Each has annual sales exceeding $6 billion.
Both Ciba and Clariant produce a range of products that affect the plastics industry, including color compounds and additives. The Clariant Masterbatches division ranks as North America's third-largest maker of precolored plastics compounds. Ciba has extensive masterbatch capacity in Europe, but none in North America.
Clariant also makes a line of engineering compounds, while Ciba produces epoxy-related products. The combined firm, which was to keep the Clariant name, would have had annual sales of about $13 billion. The alliance would have eliminated 3,000 of 55,000 jobs worldwide and was expected to create annual savings of $430 million by 2001.
Tim Gerdeman, a specialty chemicals stock analyst with Salomon Smith Barney in Chicago, said the aborted Clariant-Ciba deal reinforces the obstacles two huge firms face when attempting to merge and may send a signal to U.S. specialty chemicals makers.
``It may discourage some U.S. companies from taking it to the altar with some specialty chemicals companies,'' Gerdeman said. ``They could spend a lot of money to look into it and then see it doesn't work.''