After failed auction, Chemtura may remain in play

By Michael Flaherty and Jonathan Keehner

NEW YORK (Reuters) - Chemical company Chemtura Corp (CEM.N: Quote, Profile, Research, Stock Buzz) put itself up for sale earlier this year, according to sources involved in the process.

And while the Merrill Lynch-run process fizzled, the company is hardly out of the merger and acquisition spotlight, thanks in part to an activist investor sitting on its board.

The question for investors now is whether the company's current restructuring will become a long-term strategy or a prelude to another auction.

The Middlebury, Connecticut company, with a $2.3 billion market capitalization, makes specialty chemicals for the agriculture, pool, construction and packaging industries. One reason the company could be ripe for the picking: it has trimmed down through job cuts, plant closings and selling assets.

Another reason is that its shares trade at just under 6 times cash flow, a cheap multiple compared to its peers.

Still another reason: Trian Fund Management LP, run by activist hedge fund investor Nelson Peltz, had a 4 percent stake in the company as of June and has his firm's co-founder on Chemtura's board.

In addition, Chemtura has another dealmaking shareholder in Apollo Management, the private equity firm that owns nearly 2 percent of the company. Sources say Apollo was the lead bidder in the Chemtura auction.

"I think there would probably be strategic buyers who would want to acquire specific business assets," said analyst Jay Harris, of research firm Goldsmith & Harris. One attractive asset is Chemtura's crop protection unit, he said.