Solstice Advanced Materials (SOLS) climbed 16% to $65.33 in midday trading on Friday after the company announced it was walking away from its planned acquisition of Element Solutions (ESI), scrapping a deal that had faced strong pushback from investors since it was unveiled in early July.

The move effectively reset a transaction that had become a test of whether Solstice could persuade shareholders to back a much larger, more diversified company. In a market that had already re-rated both stocks lower after the announcement, the decision to end the process removed a source of uncertainty while leaving each company to pursue its own strategy.

The Scrapped Merger

The original transaction, announced in early July, was a cash-and-stock deal that would have roughly doubled Solstice's size. Under the plan, Solstice's refrigerants and nuclear fuel materials were to be combined with Element Solutions' semiconductor manufacturing products, positioning the combined company across three parts of the AI supply chain: chips, data centers, and power.

Investors were not on board with the strategy. Solstice stock dropped from above $80 before the announcement to below $57 heading into Friday's session, while Element Solutions also declined, falling from over $42 to $36.52 at Thursday's close.

Mutual Termination, No Breakup Fees

The boards of both companies voted unanimously to terminate the agreement, and no breakup fees were owed by either side. Solstice Chairman Rajeev Gautam said conversations with investors made it clear that keeping the companies independent was the right move.

CEO David Sewell said the company "respects our shareholders' views," adding that he has "great confidence" in Solstice's standalone strategic plan.

$500 Million Buyback and Reaffirmed Guidance

Alongside the termination announcement, Solstice approved its first-ever share repurchase program, authorizing up to $500 million in buybacks from the open market.

The buyback adds a capital-return element to the company's standalone plan at a time when management is trying to show it can create value without the merger. The company also reaffirmed its full-year 2026 guidance, saying it expects net sales between $4.125 billion and $4.185 billion and adjusted earnings per share between $2.75 and $2.95.

Analysts Respond

RBC analyst Arun Viswanathan had initially supported the deal, arguing that the post-announcement selloff of more than 20% was overdone and that the purchase price of roughly 21 times EBITDA was attractive compared with peers trading at 25 to 30 times. Following the cancellation, he said he "applauds" management's decision to return to its organic growth strategy.

UBS analyst Joshua Spector called the cancellation a positive for both stocks. BMO analyst John McNulty described Solstice as an "undervalued and compelling way to invest in the high-growth uranium, electronics, and refrigerant markets."

Wall Street Consensus

Gordon Haskett analyst Don Bilson, who focuses on special situations and deal activity, said Element Solutions management would have struggled to secure the shareholder votes needed to push the merger through, and he called the decision to drop it a wise one.

Wall Street currently holds a Strong Buy consensus on SOLS, based on five Buy ratings and one Hold assigned over the past three months. The average 12-month price target sits at $78.17, implying roughly 18% upside from current levels.

Market Reaction

Element Solutions stock was up just 0.2% on Friday, while the S&P 500 gained 0.4% on the day. Solstice advanced to $65.33 in midday trading, with the $500 million buyback program now active and full-year guidance intact.