Huntsman board authorizes extension of merger agreement with Hexion

By Lisa Kerner

Charlotte, N.C., July 2 - Huntsman Corp. said its board of directors "unanimously provisionally authorized" the company to exercise its right to extend the merger agreement with Hexion Specialty Chemicals, Inc. by an additional 90 days to Oct. 2.

A formal notice of the extension is expected to be delivered to Hexion on July 4, according to a Huntsman news release.

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.

In addition to extending the merger agreement, Huntsman filed a counterclaim to Hexion's lawsuit citing breach of contract and asked the Delaware court to expedite discovery and trial.

Hexion responded that the counterclaim is "without merit."

Huntsman wants the court to declare that Hexion's release of the Duff & Phelps opinion does not excuse Hexion from its obligations.

Hexion had gone to court to declare its contractual rights under the merger 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, it was previously reported.

Also, Hexion doubted that Credit Suisse and Deutsche Bank can be provided with a reasonably satisfactory solvency opinion or certificate, a condition of their financing commitments.

According to Huntsman, it is possible to provide Hexion's lenders with assurance of solvency and to declare that no material adverse effect has occurred under the merger agreement.

"After actively evaluating the current situation, our board has concluded that if Apollo causes Hexion to honor its contractual obligations, Hexion will obtain the antitrust approvals and the merger can and will close by Oct. 2," Huntsman president and chief executive officer Peter Huntsman stated in the release.

"Apollo Management LP and Hexion continue to assert their ongoing intention that Hexion will do the work necessary to complete the transaction, and we are asking the Delaware court to make those more than hollow words," he added.

Hexion noted that under the companies' merger agreement, Huntsman may extend the termination date to Oct. 2 only if its board believes the transaction can be completed in that time frame.

"We do not understand how Huntsman's board of directors could in good faith make that determination," Hexion chairman, president and CEO Craig O. Morrison said in a company statement.

"There is no factual basis to conclude that the combined company would be solvent. As a result, the merger is not viable," Morrison said.

While Hexion continues to believe that Huntsman has suffered a material adverse effect, Morrison said the company continues to meet its contractual obligations as demonstrated by the European Commission's decision to approve the merger.

Morrison also noted Hexion's stable capital structure and more than $475 million of liquidity.

In June, Huntsman filed suit against Apollo and its founders Leon Black and Joshua Harris in Conroe, Texas, for fraud and tortious interference, claiming Apollo induced Huntsman to terminate its merger agreement with Basell AF in favor of a transaction with Apollo affiliate Hexion.

Terminating the agreement with Basell cost Huntsman a $200 million break-up fee.

Huntsman is seeking a jury trial to determine the defendants' liability to Huntsman for actual damages exceeding $3 billion, plus exemplary damages, 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.

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