Huntsman disagrees with Hexion on extension of merger agreement

By Lisa Kerner

Charlotte, N.C., June 30 - Huntsman Corp. said it disagrees with Hexion Specialty Chemicals, Inc. and maintains that Huntsman does have the right to extend the termination date under its merger agreement with Hexion.

On June 27, Hexion said it did not see a basis for Huntsman to extend the term of the companies' merger agreement past July 4.

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.

In addition, Huntsman disagrees with Hexion's belief that the merger cannot be consummated, according to a June 30 letter to Hexion included in an 8-K filed with the Securities and Exchange Commission.

The letter was in response to Hexion's earlier letter to Huntsman claiming the combined company would be insolvent. As a result, Hexion doubts 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 can't be satisfied, it was previously reported.

Huntsman, in its reply, said it believes the company has not suffered a material adverse effect under the merger agreement and that a solvency opinion or certificate that satisfies the conditions of the commitment letters can be provided.

"If necessary, we firmly believe that the courts will intercede to aid in closing the transaction," the Huntsman letter stated.

"We believe that all the conditions to your existing commitment letters can be fulfilled if you are willing to proceed in good faith and abide by your contractual obligations," Huntsman said in the letter.

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.

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.

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.

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