By Kit Norton
Something strange happened in the market on Tuesday.
Chemical companies Huntsman and Olin announced an agreement to combine in an all-stock merger, creating a new North American chemicals major with about $12.5 billion in combined annual revenue.
The combined company will be renamed Olin Huntsman and the combination is expected to close in the first half of 2027.
Under the terms of the agreement, Huntsman shareholders will receive 0.5476 shares in Olin for every one share of Huntsman. Olin shareholders will own about 54.5% of the new company and Huntsman shareholders will own about 45.5%
On the face of it, nothing appeared dramatic about the deal. However, Huntsman stock sank 18% to $13, on pace for its worst daily percentage decline since September 2015. Olin shares declined 7.6% to $23.36.
The market's reaction to the merger appeared to be less about the future of the combined company and more about how the deal seemed to value Huntsman at $13.85 a share, or a 13% discount to the closing price of $15.89 a share from Monday.
"The initial market reaction reflects a unique structuring mechanism where the exchange ratio was determined using a 30-day volume-weighted average price (VWAP) measured as of June 12, 2026," Alembic Global Advisors analyst Hassan Ahmed wrote Tuesday.
"Because Olin's stock experienced sharp downward pressure last week, an at-the-market backward-looking VWAP created an immediate optical discount relative to yesterday's spot closing prices," Ahmed added.
Huntsman CEO Peter Huntsman said in the media release Tuesday that he and Olin CEO Ken Lane agreed to use an at-the-market exchange ratio using volume-weighted average prices over the trailing 30 days, measured as of the close of June 12, 2026, to deliver a premium to Huntsman's shareholders "relative to the historical averages while reflecting current market conditions."
"It is also equitable for Olin's shareholders, smoothing out share price movements from last week's trading. Looking ahead, our shared focus is on capturing the significant long-term value this transaction creates for both sets of shareholders," Huntsman said.
The 30-day volume weighted average price as of June 12, 2026, for Huntsman and Olin is $14.60 and $26.58, respectively, according to Dow Jones Market Data.
While the initial investor reaction was negative to the news of the deal, there are positives, according to Wall Street.
Seaport Research Partners analyst Michael Harrison noted Tuesday that OlinHuntsman will have larger scale and an advantaged cost position, along with around $400 million in synergies, particularly in the U.S. Gulf Coast.
Huntsman manufactures and is a global supplier of polyurethanes -- composites, adhesives, amines, and other additives -- for the plastics, automotive and construction industries.
Olin can provide chlorine and caustic soda that are currently inputs for Huntsman's product lines, according to analysts.
"To a large extent, we view this merger as bringing together two companies near trough Ebitda," Harrison wrote.
"We have some concerns that by combining with HUN, OLN may be moving closer to competing with its downstream customers, though this sort of situation is not unusual with diversified chemical suppliers," Harrison added.
Write to Kit Norton at kit.norton@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 16, 2026 14:03 ET (18:03 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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