Hexion takes $167 million write-down related to now 'unlikely' Huntsman merger

By Jennifer Lanning Drey

Portland, Ore., Aug. 14 - Hexion Specialty Chemicals, Inc. reported a second-quarter operating loss of $105 million, down from operating income of $89 million in the prior-year period, after taking a $167 million write-off related to previously deferred merger costs associated with the possible acquisition of Huntsman Corp., Craig O. Morrison, chief executive officer of Hexion, said Thursday.

"While Hexion is continuing to comply with the terms of the merger, we expensed our previously capitalized merger costs as we no longer believe that the merger is likely to be consummated," Morrison said.

As previously reported, Hexion filed suit in the Delaware Court of Chancery in June alleging that the capital structure agreed to by the parties for the combined company is no longer viable due primarily to Huntsman's increased net debt and lower-than-expected earnings. The lawsuit also alleges that Huntsman suffered a material adverse effect, as defined in the merger agreement.

The trial is scheduled to begin Sept. 8.

Due to the pending suit, Hexion's management did not take questions following their formal remarks.

Liquidity of $450 million

Hexion ended the second quarter with cash and availability under its credit facilities of $450 million and net debt of $3.55 billion, chief financial officer William Carter, reported during the call.

Carter said strong cash flow management practices continued to improve working capital metrics during the quarter.

Hexion reported second-quarter revenues of $1.67 billion, up 14% from the prior year, while segment EBITDA declined to $131 million from $154 million in the prior-year period. Increased raw materials and energy costs drove the decline.

Hexion is looking to offset the cost pressures with pricing actions that are already being implemented, synergy programs and cost savings, Morrison said.

Based in Columbus, Ohio, Hexion makes thermoset resins.

© 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.