External Content

The following content is sourced from external partners. We cannot guarantee that it is suitable for the visually or hearing impaired.

(Bloomberg) -- Clariant AG’s planned $6.4 billion takeover of Huntsman Corp. will make it a major player in China for commodity polyurethane chemicals, yet the Swiss company is also looking to exploit niche gaps in the market, including additives to allow plastic film recycling.

“Private Chinese companies are growing the fastest as they have the strongest insight into the market needs, but they do have a gap in the technologies they can provide,” Stephan Lynen, head of Clariant’s additives business unit, said in an interview. “That’s where we come into play.”

While China National Chemical Corp. and Huntsman rival Wanhua Chemical have burst onto to the world stage via acquisitions and overseas expansion, specialty ingredients that can make chemicals more environmentally friendly remain an Achilles heel for China’s chemical industry. It’s an opportunity for Clariant, which grew sales 7 percent there last year and is investing millions of francs in plants near Shanghai as well as a laboratory to make additives tailored to Chinese customers in agriculture, packaging and cars.

The ability to recycle products such as plastic film used in abundance in farming is becoming paramount as China races to improve its environmental footprint, Lynen said. By introducing a polymer additive into the plastic, Clariant aims to at least double the lifespan of films and can increase the usage of recycled material by 20 percent.

Lynen’s unit is among those that have been at the forefront of Chief Executive Officer Hariolf Kottmann’s long-running transformation of Clariant. His latest and boldest move -- the purchase of Huntsman -- got a mixed reception from investors on both sides when it was announced on May 22, and activists are seeking to unravel the deal so that the Swiss company can explore other strategic options.

For some shareholders, the Basel-based company’s move into methylene diphenyl diisocyanate, used in polyurethane foam, and textile chemicals is a step back in time. Clariant sold its textiles business to a private equity firm in late 2012 to focus on higher-margin specialty chemicals.

Lynen is optimistic that Huntsman will be a boost for Clariant in China given its “very strong footprint,” he said, declining to discuss the transaction further.

Clariant is among a host of European chemicals companies strengthening their foothold in China, which will grow from 40 percent of the specialty chemicals market currently to between 50 percent and 60 percent by 2025, Lynen said by phone. Local insight into specific markets in the past gave domestic private companies the upper hand. Now President Xi Jinping’s push to tackle pollution and demands of the China’s middle class for safer products could give European companies an opening.

The performance of the additives Clariant provides for the plastic films is “a technology which even today is not available with these local Chinese players,” Lynen said. “There’s a huge opportunity.”

To contact the reporter on this story: Alice Baghdjian in Zurich at abaghdjian@bloomberg.net.

To contact the editors responsible for this story: Tara Patel at tpatel2@bloomberg.net, Andrew Noël, Angela Cullen

©2017 Bloomberg L.P.

Bloomberg