This post uses hypothetical scenarios for illustrative purposes only. It does not describe any actual client, transaction, or representation, and is not legal advice.
On June 16, Olin and Huntsman announced they would combine in an all-stock merger of equals to build a twelve-and-a-half-billion-dollar North American chemicals company. The terms are clean to state. Huntsman holders get 0.5476 of an Olin share for each Huntsman share. Olin holders end up with roughly 54.5 percent of the combined company, Huntsman holders with roughly 45.5 percent. The deal is expected to close in the first half of 2027. Read those sentences again and notice what is not in them: a dollar figure that either side is guaranteed to receive.
That is the defining feature of a fixed-exchange-ratio stock deal, and it is the feature that gets lost when the press release calls the combination “transformative.” A fixed ratio with no collar, set against a close that is the better part of a year away, is a decision about who bears the risk that the two stocks move apart before the deal actually happens. It is one of the most consequential decisions in the agreement and one of the least discussed at the announcement. With a marquee example now on the tape, it is worth walking through what the structure does and what the drafting alternatives are.
Fixed ratio, floating value
In a fixed-exchange-ratio merger, the number of acquirer shares each target share converts into is locked at signing. What floats is the value of those shares. If you are a Huntsman holder promised 0.5476 of an Olin share, you know exactly how many Olin shares you will own, and you have no idea what they will be worth at closing. Between June 2026 and a first-half-2027 close, Olin’s stock will do what chemical-cycle equities do, and the dollar value of the consideration will ride along with it. The ratio is certain; the value is not.
Contrast the fixed-value alternative, where the agreement fixes the dollars and floats the share count — the target gets, say, $30 of stock, and the number of acquirer shares adjusts at closing to deliver that value. There the target is insulated from a decline in the acquirer’s stock down to the agreed dollar figure, and the acquirer absorbs that downside through dilution — which is why fixed-value deals are themselves usually capped by a ceiling on the shares the acquirer must issue rather than left open-ended. The two structures allocate the same risk in opposite directions, and the choice between them is rarely an accident. It signals how the parties see the deal and how confident each is in the other’s stock.
The merger-of-equals tell
A fixed exchange ratio is the natural grammar of a true merger of equals, and Olin/Huntsman is a clean illustration of why. The premise of an MOE is that neither side is buying the other; two businesses are pooling into one, and the ownership split — here, the 54.5/45.5 line — is meant to reflect relative contribution, not a premium paid by an acquirer to a target. The same logic governs how two private companies frame a merger of equals before the term sheet, where the contribution split has to be negotiated without a public market to price it. A fixed exchange ratio expresses exactly that idea. It says: we have agreed on our relative weights, and we will both ride the combined entity’s stock from here. Bolt a collar onto that, or convert it to fixed value, and you have implicitly recast one party as a buyer guaranteeing the other a price — which is precisely the acquirer-target framing an MOE is built to avoid.
That is why you so rarely see collars in genuine mergers of equals, and why their absence in Olin/Huntsman is a feature rather than an oversight. The parties have agreed to share the market’s verdict on the combined company between signing and close. The cost of that purity is that both shareholder bases are exposed to relative price movement for the entire interim period, and in a deal expected to take the better part of a year to clear regulators, that interim period is long.
What a collar would have changed
A collar is the contractual device that caps the range of outcomes a fixed ratio can produce. In its common form, the exchange ratio stays fixed only so long as the acquirer’s stock trades inside a band; if the stock breaks above or below the band’s edges, the ratio flexes to keep the deliverable value inside a corridor. A symmetrical collar protects both sides from the tails — the target from a collapse in the acquirer’s price, the acquirer from over-delivering value if its own stock runs. Some deals go further and add a walk-away right or a top-up share issuance if the price breaches a hard floor.
The reason to care about the collar question is that it determines what happens in exactly the scenario nobody is modeling at announcement: a sharp, sustained move in one stock during a long pendency. If Olin re-rates upward before the 2027 close, Huntsman holders locked at 0.5476 capture the upside — good for them, and a cost the Olin side accepted by going collarless. If Olin sells off, Huntsman holders absorb that on a fixed ratio with no floor to catch them. In a shorter deal the exposure is academic. In a deal with a multi-quarter regulatory runway, it is real money, and the parties have chosen to let it ride. Where a deal lands on the seller-friendly versus buyer-friendly spectrum often comes down to quiet structural choices like this one, not the headline premium.
The interim period is the whole exposure
The length of the gap between signing and closing is what turns the fixed-ratio choice from a formality into a live risk. A deal that closes in six weeks gives the market little time to move the two stocks apart. A deal that closes in three or four quarters — because it needs antitrust clearance, two shareholder votes, and the integration planning a twelve-billion-dollar combination requires — gives the market every opportunity. Olin disclosed a first-half-2027 target, which from a June 2026 signing is roughly a year of exposure. Over a year, a chemicals cycle can turn, a feedstock shock can hit one party’s margins and not the other’s, and a regulator can extract a divestiture that re-rates one of the two stocks. The fixed ratio holds through all of it.
This is the point I press with clients looking at long-dated stock deals. The exchange-ratio mechanic is not a closing-day detail; it is a position you hold for the entire pendency of the deal. If you are advising the side whose stock you think is more likely to fall, a collar or a fixed-value structure is worth real negotiating capital. If you are advising the side whose stock you think will hold or rise, the fixed ratio is the structure that lets your holders keep the upside. Either way, the time to have the conversation is at the term sheet, because once the ratio is announced as the centerpiece of a merger of equals, reopening it reads as one side losing its nerve.
The drafting takeaways
First, treat the fixed-versus-floating choice as a deliberate risk allocation and price it as one, not as a default to be inherited from the last MOE precedent your team pulled. The structure that produces the cleanest optics — a fixed ratio in a merger of equals — also produces the most interim price exposure, and someone on each side should be able to articulate why that trade is acceptable for their holders.
Second, size the collar question to the expected pendency. The longer the regulatory runway, the stronger the case for some protection against the tails, even in an MOE where a full collar would muddy the equal-partners framing. A narrow, symmetrical collar that only engages on a severe move is a defensible compromise between purity and prudence, and it is easier to defend to a board than an unbounded fixed ratio when the close is a year out.
Third, do not let the absence of a premium lull anyone into thinking there is no price risk to manage. An all-stock MOE has no premium to argue about, which tends to move the negotiation away from valuation and toward governance and social issues — who is CEO, how the board splits, whose name goes first. Those matter. But the exchange-ratio mechanic is quietly carrying as much economic risk as anything in the governance term sheet, and it deserves the same level of attention. In a stock deal, the consideration mechanic is the deal, and a fixed ratio with a long fuse is a decision both sides should make with their eyes open — the way, it appears, Olin and Huntsman did.
If you are negotiating a stock-for-stock combination and want a second read on the exchange-ratio mechanics before they harden into the announcement, feel free to reach out to my firm manager, Magda, at Magda@montague.law, or fill out our contact form. Mention you read this post.
— John
