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Ciba, Clariant call off deal
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December 9, 1998: 1:17 p.m. ET
Swiss chemical giants say potential risks derailed $13.2B merger
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NEW YORK (CNNfn) - Swiss chemical makers Ciba Specialty Chemicals AG and Clariant International Ltd. Wednesday called off their planned $13.2-billion merger after a review turned up a series of potentially damaging risks.
"The decision of the board follows a period of extensive due diligence which revealed commercial, financial, legal and regulatory risks and constraints in executing the planned transaction and which would affect the future merged company," Ciba said in a statement.
Both companies declined further comment.
When Ciba and Clariant announced their merger intentions last month, company executives hailed the deal because the firms are involved in similar business, hoping the combination would result in significant cost savings.
Ironically, analysts said, that overlap was likely a principal reason the companies called off the deal. The merger was almost certain to face close antitrust scrutiny in Europe and the United States. Ciba and Clariant had great overlap in the high-performance pigments, textile dyes and additives market segments.
"They may have received signals that European and U.S. antitrust authorities would have made them make meaningful disposals," said Michael Stone, an analyst at Deutsche Morgan Grenfell in London. "A number of large companies may have complained, as well."
Analysts had previously warned that the deal wouldn't solve the fundamental problems facing the world's chemical industry.
Tuesday, U.S. chemical maker Union Carbide Corp. (UK) warned of lower-than-anticipated fourth-quarter earnings, citing weak chemical markets in Asia.
"Ciba may have been concerned about deterioration in Clariant's business," Stone said. "Since the companies overlap so much, they probably would have experienced deterioration simultaneously. And I do think things look difficult in the fourth quarter [for the industry]."
Had the deal gone through, the combined company would have retained the Clariant name, though Ciba chairman Rolf Meyer would have been the company's chief executive.
Clariant shareholders would have held 54 percent of the combined company; Ciba shareholders would have retained 46 percent.
Ciba closed down 1.25 Swiss francs at 115.75 on the Swiss exchange, while Clariant shed 11 francs to 613. 
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