NewsFlashHexion sues Huntsman on merger
18 June 2008 22:29 [Source: ICIS news]
HOUSTON (ICIS news)--US producer Hexion Specialty Chemicals has sued Huntsman, alleging that their $10.6bn (€6.8bn) merger would produce an insolvent business, the company said on Wednesday.
Since announcing the merger, Huntsman's finances have deteriorated due to increased debt and lower-than-expected earnings, Hexion said in a lawsuit filed in Delaware state court.
As such, banks will not likely provide the debt financing for the merger, Hexion said.
Moreover, the deterioration meets the criteria set by the merger agreement for a material adverse effect, Hexion said.
Duff & Phelps, an independent financial advisor, also found that the combined company would be insolvent, Hexion said.
Nonetheless, Hexion will do its best to close the transaction, although it does not believe that alternate financing will be available, the company said.
“While both Hexion and Huntsman can be successful as separate companies, they cannot now support the debt load that was agreed to at the time the transaction was put together,” according to a statement by said Craig Morrison, Hexion president.
“We continue to have enormous respect for Huntsman, the Huntsman family and management team and still believe that a combination of the two companies would offer significant strategic benefits," Morrison said. "However, the financing for the acquisition is predicated on a certain level of financial performance and, given the increase in Huntsman’s total debt and decrease in earnings, Hexion does not believe that the transaction can be completed.”
($1 = €0.64)
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