Solstice (SOLS) and Element Solutions (ESI) Call Off Their $14.5 Billion Combination

Reuters reported that Solstice Advanced Materials, Inc. (NASDAQ: SOLS ) and Element Solutions Inc (NYSE: ESI ) mutually agreed to terminate their $14.5 billion merger agreement, the companies said on August 27, citing feedback from shareholders on both sides who preferred each to stay independent. Neither side will pay a termination fee.

Solstice Chairman Rajeev Gautam said the company valued that feedback, including shareholders' "excitement about Solstice's strategy and growth trajectory as an independent company." Solstice's board also authorized its first-ever buyback, up to $500 million, and reaffirmed its recently raised guidance. Solstice shares jumped 15% in after-hours trading, while Element gained 4%. The deal, announced July 6 just 10 months after Solstice's Honeywell spin-off, would have combined Solstice's refrigerants and specialty materials businesses with Element's electronics chemicals operations, paying Element holders $10 cash plus 0.5 Solstice shares per share. The original announcement got a rough welcome: Solstice fell nearly 15% that day, which CEO David Sewell blamed on arbitrage trading, not doubts about the deal.

Both companies continue to perform strongly on their own. Solstice's second-quarter net sales rose 11% to $1.148 billion, and the company raised its full-year sales guidance to $4.125 billion-$4.185 billion. Element delivered an even stronger quarter, with record net sales up 56% to $978 million and full-year adjusted EBITDA guidance raised to $690 million-$710 million.

Solstice Advanced Materials, Inc. (NASDAQ: SOLS ) sheds significant deal risk by walking away. The termination removes the financing and merger risks linked to the acquisition and eliminates the need to use the $4.685 billion bridge facility. It also lets Solstice maintain its 1.3x net leverage. Its new $500 million buyback, the company's first ever, also gives Solstice a direct way to return capital to shareholders while it focuses on organic growth.

Element Solutions Inc (NYSE: ESI ) also maintains the strengths that its shareholders wanted to preserve. Chairman Ian Ashken said investors valued Element's management team, culture, and existing business portfolio. CEO Benjamin Gliklich said the company's growth remains compelling. Remaining independent allows Element to continue investing in its existing businesses and pursuing its own growth strategy without taking on the risks of a larger combination.

The merger had strategic benefits, and both companies now give up those potential gains. The proposed combination would have generated roughly $6.8 billion in 2025 sales and targeted more than $180 million in annual run-rate synergies by the third year after closing. By remaining separate, neither company can capture those merger-related scale and cost benefits.