Shareholder group offers backstop commitment to close merger of Huntsman, Hexion

By Lisa Kerner

Charlotte, N.C., Sept. 8 - The Huntsman Corp. shareholder group led by D.E. Shaw and Citadel Investment Group, LLC agreed to make backstop payments in yet another effort to close the merger of Huntsman and Hexion Specialty Chemicals, Inc.

In its prior proposal, the investor group offered to invest $500 million in Hexion in the form of a subscription for contingent value rights.

The group's Sept. 8 backstop letter, along with support from the Huntsman family stockholders, provide Hexion with certainty that "at least $416,460,102 in cash will be added to the balance sheet of the combined company at closing, even if Hexion does not pursue the CVR financing," according to a schedule 13D filed with the Securities and Exchange Commission.

Hexion said in a statement that this latest proposal falls short of closing the funding gap or making the combined company solvent. On Monday, the Court of Chancery of the State of Delaware was to begin hearing Hexion's case against Huntsman. Hexion is asking the court to determine that it is not obligated to consummate the merger.

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 June, Hexion said the capital structure agreed to for the combined company is no longer viable and that completing the merger would render the combined company insolvent. The company blamed Huntsman's increased net debt and its lower-than-expected earnings and declined to extend the merger agreement.

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

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