The British group baffled the City when it said that talks with a potential bidder had ended, less than 24 hours after admitting it was discussing an offer. The collapse sent Laporte shares crashing 12.5 per cent to 667.5p.
Sources close to the deal said the embarrassing U-turn was prompted by Hoechst's last-minute opposition. The German chemicals and pharmaceutical group, which holds 45 per cent of Clariant, is believed to have vetoed the deal at a meeting with the two companies on Monday night. The German company was concerned that a Clariant-Laporte deal might jeopardise its own merger with Rhone-Poulenc of France. Hoechst needs to sell its chemical businesses, including its stake in Clariant, before merging with Rhone- Poulenc, and was worried that corporate action by Clariant might delay the process.
Industry sources said Hoechst could also have hesitated at the prospect of financing part of the Laporte deal as Clariant was likely to add to its $1.9bn (pounds 1.2bn) debt to fund the takeover.
"It was a done deal, they went for agreement from Hoechst and they were refused," one insider said. Another source said the deal cleared all relevant hurdles before foundering on Hoechst's concerns. "This is not about price, nor management, personalities, strategy, due diligence or competition issues," he said.
Analysts said the collapse of the takeover was a huge embarrassment both for Clariant and Laporte's chief executive, Jim Leng. They said the demise of the deal would prompt other chemicals groups to bid for the UK company. "Laporte is in play now. The fact that they were willing to agree a takeover means they are now up for sale," said one analyst.
Industry experts said the US group PPG and some European players, including Viag and Degussa-Hels of Germany, could enter the fray.
This is the second setback in four months for Clariant's expansion plans. Last year the group dropped plans for a $8.1bn merger with Swiss rival Ciba Speciality Chemicals.