White Tale comprises investment funds 40 North Latitude Master Fund Ltd., controlled by U.S. investors David Winter and David Millstone, and Corvex Master Fund Ltd., controlled by well-known activist investor Keith Meister.

Clariant and Huntsman eventually threw in the towel, saying that the ongoing stake building by the activists—and the fact other shareholders had started to support their cause—meant there was “too much uncertainty” that they would secure the two-thirds shareholder approval needed for the deal to proceed under Swiss law.

The merger, first announced in May, would have created a trans-Atlantic giant offering an array of chemicals and other products used across industries from aerospace to agriculture to household cleaning. The companies, neither of which will have to pay a break fee, said they still believed the deal would have been in the best interest of shareholders.

Shares in Clariant fell more than 5% in early trading on Friday but regained some ground to trade down 2.4% in afternoon trading.

“Now Clariant is again the No. 1 takeover target among EU chemicals,” said analysts at Baader Helvea Equity Research. “However, we doubt that bidders will already now raise their hands.”

Clariant Chief Executive Hariolf Kottmann told reporters it was too soon for the company to discuss future options but that the company was well prepared to continue on its own.

“While White Tale’s position on the merger has been different from ours, we share a common interest in increasing Clariant’s value,” Mr. Kottmann said, adding that representatives from White Tale hadn’t criticized management—all of whom will stay—or governance of the company.

White Tale didn’t have an immediate comment on the termination of the merger.

In the call with reporters, Mr. Kottmann defended the deal and said it was “pure nonsense” to say the company hadn’t explored all of the options available to it. White Tale had urged the company to hire an investment bank to explore other options.

He also appeared to bemoan some of the consequences of the increased role activist investors are playing.

“I think you have clearly to distinguish that management of companies try to increase the enterprise value” for shareholders, he said, while “activist shareholders try to increase the value of their investment” and when they meet their objectives “they are out.”

“I tend to the conclusion that it is a dangerous development for many companies, for the industries and for thousands of working places,” he said.

In an interview with Swiss newspaper Finanz und Wirtschaft published Oct. 6, Messrs. Millstone and Winter said they were “long-term oriented investors” and that they were “here to stay, to make and build” with Clariant.

The collapse of the Clariant-Huntsman deal is the latest sign of growing shareholder activism in Europe, and particularly in Switzerland.

Nestle SA has also grappled with pressure from one of its largest shareholders, hedge fund Third Point LLC—which is controlled by investor Daniel Loeb —to boost shareholder value. Nestle has responded with portfolio changes, a share buy-back program and a new profit-margin target.

Earlier this month, Swiss-based hedge fund RBR Capital Advisors AG urged a breakup of Credit Suisse Group AG into an investment bank, a wealth manager and an asset manager, although its stake in the Swiss banking giant is very small and its proposals have yet to gain much traction.

Elsewhere, Akzo Nobel endured a monthslong standoff with Elliott Management Corp over the activist’s push to force the paint maker into takeover talks with U.S. rival PPG Industries Inc. They eventually made peace in August.

Elliott has also agitated for change at BHP Billiton, where it has called for several changes including a spin off of the miner’s U.S. oil-and-gas assets.

Write to Brian Blackstone at brian.blackstone@wsj.com

https://www.wsj.com/articles/clariant-and-huntsman-shelve-planned-merger-1509081733