Corrected: Huntsman vows to fight in Hexion case

25 June 2008 23:13  [Source: ICIS news]

Correction: In the ICIS news story headlined “Huntsman vows to fight in Hexion case” dated 25 June 2008, please read in the 11th paragraph … $3.1bn lawsuit … instead of … $3.1m lawsuit …. A corrected story follows.

By Joseph Chang

NEW YORK (ICIS news)--Huntsman will “fight to the bitter end” to enforce the terms of its $10.6bn (€6.8bn) merger agreement with Hexion Specialty Chemicals, CEO Peter Huntsman said on Wednesday.

“We have an ironclad agreement that’s not dependent on a solvency opinion. We have a deal at $28 [per share], and they need to abide by their legal agreement and, equally as important, their ethical agreement,” he said.

“It’s a sad statement when two parties in our industry make a deal and, all of a sudden, you find out that you’re being sued,” Huntsman said.

Hexion, owned by private equity firm Apollo Management, filed a lawsuit in Delaware state court on 18 June arguing that the combined company would be insolvent, that it was unlikely to secure the financing to get the deal done and that it is not responsible for the $325m fee to terminate the merger with Huntsman.

Peter Huntsman said he learned Hexion would back out of the deal late on 18 June in Brussels, Belgium, when he received a call from Hexion CEO Craig Morrison.

Morrison said the deal was over because of a solvency opinion rendered by financial advisory firm Duff & Phelps, which said that the combined company would be insolvent, according to Huntsman.

“They felt the deal couldn’t get financed and said that it was over,” Huntsman said.

“Simultaneous to the phone call, Hexion filed its lawsuit against us,” Huntsman recalled. “They had people in our office at the time doing due diligence as they have been for some time. They received a call and then literally ran out of our office. It was that sudden.”

Peter Huntsman indicated he was blindsided, as he had been buying shares of Huntsman the week before Hexion backed out.

On 3 June, Peter Huntsman bought 19,000 shares on the open market at $21.09-$21.16/share, for a total of $408,000.

Huntsman, in its $3.1bn lawsuit against Apollo and its principals Leon Black and Joshua Harris, alleges that Apollo committed fraud, as it never intended for Hexion to pay the agreed-upon $28/share for Huntsman.

“This is an Apollo scheme and, unfortunately, the way that they negotiate a lot of their deals,” Huntsman said. “We are contending in our Texas litigation that they did whatever they had to do to beat the Access deal.”

Access Industries, the owner of Basell, was another suitor for Huntsman.

“And now, right before the deadline to close the deal on 4 July, they come in pull the rug out, hoping to get a better price,” Huntsman said.

Apollo has not contacted Huntsman to renegotiate the terms of the deal, he said.

“But they’ve devalued and defamed our company, doing as much damage as they possibly could to set up that course of action,” he said.

Huntsman contended no material adverse effect (MAE) clause has been triggered, as Hexion claims.

“The earnings could drop substantially, but that would not trigger an MAE if it was an industry event,” Huntsman said.

Huntsman said the company is not talking to other parties for a sale. “We fully expect Apollo and Hexion to execute the agreement,” he said.

The resolution of the lawsuits could take about a year in the courts, Huntsman said.

($1 = €0.64)

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For more analysis and insight on the Huntsman situation, look for the 7 July issue of ICIS Chemical Business magazine

By: Joseph Chang
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