Huntsman to receive $1 billion from Hexion, Apollo under settlement agreement; merger terminated

By Lisa Kerner

Charlotte, N.C., Dec. 15 - Huntsman Corp. settled its claims with Hexion Specialty Chemicals, Inc., Apollo Management, LP and some affiliates for $1 billion and terminated its merger agreement with Hexion, Huntsman announced on Monday.

Of the $1 billion, some affiliates of Apollo have agreed to pay $425 million in cash and purchase $250 million of the company's 7% convertible senior notes.

Huntsman will also receive a $325 million break-up fee from Hexion, according to a company news release.

Hexion said it has financial commitments from affiliates of Credit Suisse and Deutsche Bank to fund the payment.

Parent company Hexion LLC will borrow the termination fee payment, which will not impact Hexion's operating performance or its compliance with its debt covenants, the company said.

Half of the settlement payments are to be paid to Huntsman by Dec. 31, with remaining payments due by March 31.

An Apollo affiliate also agreed to make a $200 million investment in Hexion LLC to be used by Hexion for general business purposes, Hexion said.

The settlement agreement also resolves Huntsman's pending claims against Apollo and its affiliates relating to Huntsman's prior merger agreement with Basell AF.

"As the majority stakeholder in Hexion and now an investor in Huntsman, we look forward to both companies traversing this economic cycle and prospering," Apollo Global Management, LLC chairman Leon Black said in a Hexion news release.

Claims against banks unresolved

Huntsman said the settlement does not resolve its multi-billion-dollar claims against Credit Suisse and Deutsche Bank that the banks conspired with Apollo and "tortiously interfered" with Huntsman's agreement with Basell and then Hexion.

A jury trial on those claims is set to begin on May 11.

In October, the banks backed out of their commitment to fund a merger of Huntsman and Hexion over solvency issues of the proposed combined company, it was previously reported.

In July 2007, Hexion agreed to acquire Huntsman in an all-cash transaction valued at approximately $10.6 billion. Huntsman shareholders approved the deal in October 2007.

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

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