Hexion files suit alleging $10.6 billion merger with Huntsman is no longer viable

By Lisa Kerner

Charlotte, N.C., June 18 - Hexion Specialty Chemicals, Inc. filed suit in the Delaware Court of Chancery to declare its contractual rights with respect to its $10.6 billion merger agreement with Huntsman Corp.

The suit alleges that the capital structure agreed to for the combined company is no longer viable because of Huntsman's increased net debt and its lower-than-expected earnings, according to a Hexion news release.

Hexion believes that completing the merger on the basis of the capital structure agreed to with Huntsman would render the combined company insolvent.

Duff & Phelps, LLC rendered the same opinion to Hexion's board of directors.

The suit also alleges that Huntsman has suffered a material adverse effect under the merger agreement, based on the "substantial deterioration" of the company's financial performance, the increase in its net debt and the expectation that the material downturn in Huntsman's business will continue, the release noted.

Hexion said it also doubts that the banks will provide the debt financing contemplated by their commitment letters or that alternate financing will be available.

However, Hexion will continue to use its "reasonable best efforts" to close the transaction, which includes obtaining all necessary antitrust and regulatory approvals.

"While both Hexion and Huntsman can be successful as separate companies, they cannot now support the debt load that was agreed to at the time the transaction was put together," Hexion chairman, president and chief executive officer Craig O. Morrison stated in the release.

On July 12, 2007, Hexion, an affiliate of Apollo Management, LP, agreed to acquire Huntsman in an all-cash transaction valued at approximately $10.6 billion, including the assumption of debt. Huntsman shareholders approved the deal in October 2007.

It was previously reported that Hexion exercised its right under the merger agreement to extend the termination date by 90 days to July 4, from April 5.

Because the merger was not completed by April 5, the $28-per-share offer price is increased at the rate of 8% per year, a prior news release noted.

Based in Columbus, Ohio, Hexion makes thermoset resins. Huntsman is a Salt Lake City manufacturer of differentiated chemicals and pigments.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.