25 September 2008 21:20 [Source: ICIS news]
NEW YORK (ICIS news)--If a merger between Hexion Specialty Chemicals and Huntsman were to take place, “the combined company would be bankrupt,” said Hexion in its post-trial brief filed on Thursday with the US Securities and Exchange Commission (SEC).
The trial involving the US-based companies’ busted $10.6bn (€7.2bn) merger started on 8 September and concluded on 16 September.
“From the perspective of a reasonable acquirer, what has happened at Huntsman post-signing is so material that the combined company would be bankrupt if the merger could somehow close,” said Hexion.
Hexion contended that Huntsman’s financial position had deteriorated to the point where a material adverse effect (MAE) occurred.
“On the last day of trial, Huntsman’s [chief financial officer], Kimo Esplin, acknowledged that Huntsman’s debt today is $1.244bn higher than Huntsman had told Merrill Lynch, Credit Suisse, Deutsche Bank and Hexion they could anticipate at year-end 2008,” stated Hexion.
“Esplin also acknowledged that a significant portion of this debt increase is attributable to the fact that Huntsman has massively underperformed on its own and everyone else’s expectations since signing,” Hexion added.
Esplin acknowledged that Huntsman missed its earnings before interest, tax, depreciation and amortisation (EBITDA) forecast for the second half of 2007 by $120m and will miss its original 2008 forecast by $420m, said Hexion.
“This was a stark admission that Huntsman has suffered an MAE that has resulted in a multibillion dollar decline in the value of the company,” Hexion stated.
“Huntsman is asking this court to ignore the market evidence, ignore the industry analysts and ignore the fact that it will miss its 2008 budget by over 28%,” Hexion added.
“The court instead should accept Huntsman’s assertion that in a softening global economy, Huntsman’s EBITDA will increase by 31% in 2009 and another 22.5% in 2010. That is Huntsman’s case on solvency,” Hexion said.
Hexion said a forced marriage would have serious consequences.
“[Hexion CEO Craig] Morrison and [chief financial officer William] Carter were clear: if this deal is forced to go through, they believe that the combined company would be in bankruptcy in short order, affecting the lives of the nearly 20,000 employees as well as creditors, customers and other stakeholders,” stated Hexion.
“[Credit Suisse banker Malcolm] Price was equally clear: it would take a miracle for Huntsman to convince Credit Suisse to accept a solvency certificate. In the year since the deal was signed, debt has gone up too high and earnings have gone down too low too support a $15.4bn loan,” it added.
The court had indicated that a decision would be made before October 2.
($1 = €0.68)
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