Huntsman finds potential source of additional financing for Hexion merger

By Angela McDaniels

Tacoma, Wash., July 24 - Huntsman Corp. asked Hexion Specialty Chemicals, Inc. for permission to share confidential Hexion information and materials with financial investors that have expressed an interest in providing supplemental financing to Hexion in connection with the companies' merger.

Huntsman president and chief executive officer Peter Huntsman made the request in a July 24 letter to Hexion chairman and CEO Craig Morrison and director Joshua Harris. The letter was included in an 8-K filing with the Securities and Exchange Commission.

In the letter, CEO Huntsman said his company strongly believes that the financing currently in place is more than adequate to complete the merger.

"Unfortunately, your public statements to the contrary have given rise to concern in some quarters that the financing might be inadequate to permit our merger to be completed and even more troubling, that your lack of financing may in some way excuse you from consummating the merger," he said.

The additional financing would facilitate the closing of the merger, provide Hexion with additional working capital and eliminate any concerns about the solvency of the post-merger Hexion, he said.

"If both your public statements and your statements to us that you are working to consummate the merger are true, you should welcome our assistance with the potential investors," Huntsman added.

Companies at odds

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

In response, Huntsman disagreed with Hexion's assertion that it suffered a material adverse effect and said it does have the right to extend the merger agreement.

Hexion then requested alternate financing proposals from Credit Suisse and Deutsche Bank AG. After this was declined, Hexion filed a motion in early July asking the Court of Chancery of the State of Delaware 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.

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

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