Hexion agrees to Huntsman backstop with conditions

By Lisa Kerner

Charlotte, N.C., Sept. 11 - Hexion Specialty Chemicals, Inc. consented to a backstop payment to Huntsman Corp. by some of Huntsman's shareholders, according to a form 8-K filed with the Securities and Exchange Commission.

In a letter to Huntsman, Hexion said it does not believe the backstop payment in its current form, including the amount contemplated, will either close the initial funding gap for the companies' merger or have any impact on the solvency of the combined company.

Hexion made several conditions to its consent:

• There will be no payment of fees or reimbursements to or for the benefit of the Huntsman shareholders making the backstop payment;

• The Huntsman shareholders will have no ongoing rights or claims with respect to, and there will be no continuing obligations of, Hexion, Huntsman, the surviving corporation or their affiliates once the backstop payment is made;

• Huntsman and the shareholders agreeing to the backstop payment will not take actions that increase or create liabilities for the combined company; and

• Hexion's receipt of definitive documentation and customary opinions regarding the backstop payment.

It was previously reported that the Huntsman shareholder group led by D.E. Shaw and Citadel Investment Group, LLC agreed to make backstop payments in an effort to close the merger with Hexion.

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 [contingent value rights] financing," according to a schedule 13D filed with the SEC.

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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