PolyOne/Clariant masterbatch deal in doubt amid coronavirus crisis

Author: Stefan Baumgarten

2020/03/20

HOUSTON (ICIS)--The worsening coronavirus (Covid-19) crisis and likely recession could jeopardise PolyOne’s deal to acquire Clariant’s masterbatch business for $1.6bn.

In a conference call on Friday, PolyOne CEO Robert Patterson said that the deal includes a “major adverse event clause” (MAC)”, and “we are going to take care, first and foremost, of our investors’ money”.

Given the “tremendous uncertainty about almost everything” because of the crisis, PolyOne will not proceed with the deal “under any or all circumstance”, he said.

The deal includes a $75m termination fee.

Analysts on the call asked about the viability of the acquisition, given that valuations have fallen since PolyOne and Clariant agreed the deal in December.

Patterson added that currently PolyOne does not need to act and “make that call right now, but we will if we have to."

The earliest closing date for the deal is 2 June, and that could be pushed out because of possible delays in obtaining regulatory approvals,

In particular in Europe authorities’ office operations are affected by public health restrictions imposed to contain the spread of the coronavirus, he said.

Also, it is still unclear how long a global recession will last, or how significant it will be, Patterson said, adding: “And that is really important, as time is to our benefit”.”

Between today and the eventual closing of the deal, PolyOne will learn more about the virus and its impacts on the economy, he said.

He went on to note that in China, where the crisis broke out, the number of coronavirus infections is reportedly declining and that country is already going back to work.

Returning to normalcy was not a matter of if, but of when, and PolyOne was staying the course and keeping options open - including working towards closing the Clariant deal, he said.

The acquisition “makes sense” in that it will strengthen PolyOne’s position in specialties, globally, he said.

But Patterson reiterated: “That doesn’t mean we ignore what is going on and proceed under any or all circumstances – we will not do that.”

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