By John Miller
ZURICH (Reuters) - A big investor in Clariant (S:CLN) and Huntsman (N:HUN) backs the chemical companies' planned $20 billion merger, saying it would unlock synergies and lift profits more than any alternative from activists seeking to derail the deal.
Alex Roepers, whose Atlantic Investment Management is the 13th-largest investor in U.S.-based Huntsman and 20th-biggest owner of Switzerland's Clariant, fears the merger fight spearheaded by White Tale Holdings is "distracting management".
White Tale, whose principals include U.S. hedge fund manager Keith Meister, has amassed a 10 percent Clariant stake worth nearly 750 million Swiss francs ($770.1 million).
Roepers said he has spoken with Meister but remains behind the deal.
"The best way to create value is by these companies combining, executing an integration plan and then looking actively for opportunities to improve the portfolio," Roepers told Reuters in an interview.
Clariant and Huntsman have promised $400 million in annual cost savings.
Completing the merger, then examining the portfolio including Clariant's pigments and masterbatches units that Chief Executive Harriolf Kottmann has said could be sold, is the best path forward, Roepers said.
"There are some pieces that could go for higher value in an auction, but that can be done post-merger," he said.
Another suitor such as Germany's Evonik (DE:EVKn) could still emerge with a more-lucrative offer for Clariant, he said, but years of waiting have produced nothing so far.
Since the merger was announced in May, Roepers has bulked up on a Clariant stake he bought in late 2016 while adding 1.8 percent of Huntsman after meeting with its management.
His combined stakes are worth around $200 million, according to Reuters calculations. They are the biggest holdings in his $1.4 billion fund.
Clariant shares have risen 7 percent since the merger announcement in May, with Huntsman shares down 3 percent.
White Tale, whose New York-based investors include David Winters and David Millstone, calls the merger "value destructive" and contrary to Clariant's focus on specialty chemicals over commodities.
Clariant confirmed on Friday it has spoken with White Tale but said the group had yet to offer an alternative to the merger, a spokesman said.
Meister did not respond to a request for comment.
Huntsman CEO Peter Huntsman said on Thursday on CNBC that White Tale's activists had also opposed his 2013 move to buy $1.1 billion worth of assets from Rockwood Holdings spun off this week in an IPO.
They "were telling us this would be a disaster to buy the Rockwood business," Huntsman said. "Here we are, celebrating the formation of a great company."
Clariant, whose merger must secure two-thirds backing among shareholders, has said none of its other top-20 shareholders oppose the deal. It has hired Goldman Sachs (NYSE:GS) to fight off White Tale.
"They'll have to go up against two very motivated managements (who want) to do this deal, who I think have very good arguments to do it," Roepers said. "We'll see who wants to go with these guys. We're not one of them."