Hexion receives US clearance for Huntsman merger

02 October 2008 22:56  [Source: ICIS news]

By Joseph Chang

NEW YORK (ICIS news)--Hexion Specialty Chemicals said on Thursday that US regulators have cleared its $10.6bn (€7.5bn) merger with Huntsman - just days after a judge found that Hexion was dragging its feet in pursuing the clearance.

“Rather than being a diligent party making all necessary efforts to obtain antitrust clearance, come ‘hell or high water’, the court was left with the impression that Hexion had, since May or June, been dragging its feet on obtaining that clearance, pending the outcome of its attempts to avoid the transaction, in contravention of its obligations under the merger agreement,” said Stephen Lamb, vice chancellor of the Delaware Chancery Court.

The Delaware court ruled in favour of Huntsman on 29 September and ordered Hexion to comply with the merger agreement and use “reasonable best efforts to take all actions necessary and proper to consummate the merger in the most expeditious manner practicable”.

If Hexion does not comply with the court’s order, it could face the prospect of “uncapped damages”, said Russ Stolle, senior vice president of global public affairs and communications for Huntsman.

“If Hexion fails to close, damages would be sought in the Delaware court,” he added.

“The Delaware court made clear that Hexion cannot simply choose to pay the $325m breakup fee to Huntsman and walk away,” Stolle said.

According to the merger agreement, the breakup fee would apply if Hexion were unable to get antitrust approval or unable to obtain financing despite best efforts.

“Although the merger agreement contemplated a capped breakup fee in certain circumstances, based on the Delaware court’s ruling, we do not believe that a cap on damages is available to Hexion anymore,” Stolle said.

“The court has already found that Hexion had knowingly and intentionally breached several of their covenants under the merger agreement and therefore may be liable for uncapped damages,” he added.

Hexion is now one step closer to consummating the merger, as the deal received clearance from the US Federal Trade Commission (FTC).

As part of the FTC clearance order, Hexion will divest part of its specialty epoxy-resin assets to Spolchemie, a Czech synthetic resins producer.

The European Commission had earlier approved the merger based on the same divestiture to Spolchemie, Hexion said.

Additional reporting by Al Greenwood

($1 = €0.71)

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