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War of Words Escalates in Huntsman Proxy Battle

Specialty chemical firm Huntsman Corp. has laid down the gauntlet in its proxy battle with hedge fund activist investor Starboard Value.

In a letter sent to shareholders on Monday from chairman, president and CEO Peter Huntsman and lead independent director and nonexecutive vice chair Cynthia Egan, Huntsman emphasized that total shareholder return of 98 percent over the last five years is evidence of the solid leadership already in place at the company.

According to Huntsman, a feather in the company’s cap was fourth-quarter adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $349 million, representing a 45 percent increase from the prior year.

Starboard in January began targeting the chemical firm, saying that it has a history of overpromising and underdelivering. It cited a 2014 Huntsman goal of reaching before-tax profits of $2 billion in two to three years—a target that still had not been reached in 2016. The fund is pushing to place Starboard CEO Jeffrey C. Smith on the Huntsman board, along with former LyondellBasell Industries CEO James L. Gallogly, former Celanese executive Sandra Beach Lin and former PetSmart CFO Susan C. Schnabel.

On March 25, when Huntsman holds its annual stockholders’ meeting, shareholders will vote on the make-up of the company’s board. Huntsman told shareholders in its letter that it had a record year with its transformed product portfolio, one that was created under the oversight of its board of directors. The company in January named packaging maker WestRock’s CEO to its board, following the appointment of former Eastland Chemical CFO Curtis E. Espeland and Hyundai Motor chief operating officer José Muñoz a week earlier.

In its letter, Huntsman urged shareholders to vote the “White” proxy card “for all” of the firm’s directors standing for election. In addition to Egan, who has served in senior leadership roles at asset management firms, and the appointees earlier this year, Huntsman is also nominating Dr. Mary C. Beckerle, who has 10-years of service on the audit committee that provided oversight in the transformation of the company’s highly-leveraged balance sheet, and Daniele Ferrari, a veteran of the differentiated chemicals business, with more than 35 years of industry experience.

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The Huntsman CEO claimed that Starboard’s nominees lack relevant industry and operational experience, adding that the last time the hedge fund controlled a chemical company it lost shareholder value. That company was GCP, which he said has underperformed Huntsman and its peers. Specifically, Huntsman said that since Starboard disclosed its position in GCP on June 6, 2019, total shareholder return (TSR) has been only 17 percent through Feb. 25, 2022, including the change of control premium that GCP acquirer Saint Gobain agreed to pay. In contrast, Huntsman said its TSR for the same period was 123 percent.

“Starboard, the New York-based hedge fund that bought 8.4 percent of our stock after our transformation was on the path to completion last year, does not care about our progress,” Huntsman said.

The CEO emphasized to shareholders that Gallogly’s experience in the chemical industry is stale, as he’s had “no business in nearly a decade.” Moreover, Gallogly’s vision is inconsistent with Huntsman’s move away from commodity chemicals toward higher margin downstream products and solutions. As for the other two nominees, Huntsman said Schnabel would bring “no relevant experience or expertise,” while Lin has never served as a C-suite executive in the chemical business. He was also critical of Starboard CEO Jeff Smith, whom Huntsman charged with being “focused solely on his fund’s short-term outlook.” Since Starboard’s average holding period is between 15 to 18 months, Huntsman told shareholders that Smith “does not have your longer-term interest at heart.”