Hexion not willing to extend merger agreement with Huntsman

By Lisa Kerner

Charlotte, N.C., June 27 - Hexion Specialty Chemicals, Inc. said it does not see a basis for Huntsman Corp. to extend the term of the companies' merger agreement past July 4.

Huntsman, in a June 27 letter to Hexion, requested extending the agreement by an additional 90 days, it was reported in a form 8-K filed with the Securities and Exchange Commission.

According to Hexion, the termination date can only be extended if:

• Hexion is in material compliance with its obligation under Section 5.4 of the merger agreement;

• The commitments to provide the financing will remain in force through the extension period;

• The Huntsman board determines that there is an objectively reasonable probability that antitrust approval can be obtained within the 90-day extension period; and

• The Huntsman board determines that there is an objectively reasonable probability that the merger can be consummated within the 90-day extension period.

Hexion believes the first two conditions have been satisfied and that the antitrust approval will be obtained in the 90-day period.

But Hexion also believes the combined company would be insolvent. Because of this, the company said it does not believe that Credit Suisse and Deutsche Bank can be provided with a reasonably satisfactory solvency opinion or certificate, a condition of their financing commitments.

Hexion also believes that Huntsman has suffered a company material adverse effect, meaning the conditions to Hexion's obligation to close cannot be satisfied.

Huntsman said it planned to "vigorously enforce" its rights under the merger agreement with Hexion, an affiliate of Apollo Management, LP, after Hexion went to court to terminate the deal, according to a prior news release.

Hexion announced on June 18 that it had filed suit in the Delaware Court of Chancery to declare its contractual rights under the agreement, alleging that the agreed-upon capital structure for the combined company is no longer viable because of Huntsman's increased net debt and its lower-than-expected earnings.

Hexion believes that completing the merger on the basis of the capital structure would render the combined company insolvent, it was previously reported.

The suit also alleges that Huntsman has suffered a material adverse effect under the merger agreement.

On July 12, 2007, Hexion 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.

Hexion exercised its right under the merger agreement to extend the termination date by 90 days to July 4 from April 5, a prior news release noted.

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

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.