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

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

Fatima Gulzar

Mon, September 7, 2026 at 2:05 AM GMT+3 4 min read

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.

Bull Case

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.

Bear Case

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.

Element Solutions Inc (NYSE:ESI) specifically loses its takeover premium. The offer valued Element at roughly $50.10 per share, about 15% above its July 2 closing price. Without the transaction, Element must now justify its valuation through standalone growth and execution rather than the premium that the proposed deal offered shareholders.

The reversal also puts more pressure on Solstice's standalone strategy. The company announced the Element deal only about 10 months after completing its Honeywell spin-off. Solstice shares fell after the acquisition announcement. Now that management has abandoned the deal, it must prove that its independent growth strategy can deliver enough value to justify walking away from the scale, synergies, and broader electronics exposure that the merger promised.

Solstice Advanced Materials, Inc. (NASDAQ:SOLS) also still faces operating challenges that the merger cancellation does not solve. Its second-quarter adjusted EBITDA margin fell 218 basis points to 25.3%, with plant-turnaround timing contributing to the decline. The firm needs to sustain its sales momentum and improve profitability while pursuing its standalone strategy.

Hedge Fund Data

Insider Monkey's database shows Solstice Advanced Materials, Inc. (NASDAQ:SOLS) was held by 72 hedge funds as of the end of the second quarter, down from 76 in the first, with holdings value slipping to $2.03 billion from $2.20 billion and an unusually high 14.5% ownership concentration. Element Solutions Inc (NYSE:ESI) moved in the opposite direction, with hedge fund interest climbing to 44 funds from 35 and holdings value jumping to $1.42 billion from $829 million, alongside a similarly high 12.2% concentration.

Conclusion

The end of the merger gives both Solstice and Element a chance to pursue growth independently, while removing the financing, merger, and execution risks that came with the deal. Solstice can now focus on organic growth and return more capital to shareholders. On the other hand, Element can build on its strong operating momentum and retain control over its strategy. However, both companies also give up the scale and synergy benefits that the $14.5 billion combination promised.

Investors should watch whether each company can sustain its growth and improve profitability enough to create more value independently than the merger could have delivered.

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