Huntsman encourages Hexion to seek third-party financing, close merger

By Lisa Kerner

Charlotte, N.C., July 9 - Huntsman Corp. reiterated that its merger agreement with Hexion Specialty Chemicals, Inc. has no financing contingency and said if Hexion believes the merger cannot be completed with the current financing, then Hexion should seek additional financing, including debt or equity financing, according to a July 8 letter from Huntsman to Hexion.

The letter was included in a form 8-K filed with the Securities and Exchange Commission.

Hexion said it intends to comply with its obligations under the merger agreement with respect to the financing and sought Huntsman's approval to pursue alternative financing under the agreement with the assistance of Gleacher Partners.

Huntsman believes the financing contemplated by the commitment letter will be available and sufficient if Hexion complies with its obligations. The commitment letters have not been terminated and remain in full force, the filing noted.

In its letter to Hexion, Huntsman reiterated its consent to Hexion engaging third-party financial institutions to seek additional financing.

According to Huntsman, no additional consent is required under the companies' confidentiality agreement in order for Hexion to seek any and all debt and equity financing that will permit the merger to close.

Huntsman was asked by Hexion to execute a consent by noon ET on July 9, according to a form 8-K filing with the SEC.

Trial set for Sept. 8

On July 8, it was reported that Hexion asked a Delaware court to determine that it is not obligated to consummate the merger with Huntsman under their July 12, 2007 agreement if the combined company would be insolvent.

Hexion is seeking a cap of $325 million on its liability to Huntsman for failure of the merger to be consummated, a prior SEC filing noted.

The court also was asked to declare that since the execution of the merger agreement, Huntsman has suffered a company material adverse effect as defined in the agreement, leaving Hexion with no obligation to make any payment to Huntsman.

The Delaware Court of Chancery granted Huntsman's request to expedite the court's review of what Huntsman called Hexion's "wrongful and ongoing efforts to scuttle" the merger, it was announced on Wednesday.

A trial is set to begin on Sept. 8 to address whether the combined company will be insolvent as Hexion claims, a Huntsman news release said.

The trial will also determine if a material adverse effect has occurred.

Huntsman said the trial is slated to end in the second week of September, giving the companies sufficient time to consummate the merger if Huntsman prevails at trial.

"We look forward to a swift repudiation of Hexion's misguided allegations and apparently disingenuous rhetoric about their intentions to comply with our merger agreement, all the while continuing to breach the same," Huntsman president and chief executive officer Peter Huntsman stated in the 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.

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

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