October 6, 2008

Volume 86, Number 40

p. 10

MERGER

Huntsman Prevails Over Hexion

Court finds that Hexion must honor its deal to buy Huntsman

Ann Thayer

HUNTSMAN CORP. has successfully defended itself against a lawsuit brought by Hexion Specialty Chemicals and its owner Apollo Management to scuttle a $10.6 billion deal to buy Huntsman Corp.

Hexion had argued that the acquisition would create an insolvent business, due in part to Huntsman Corp.'s financial performance since the companies agreed to the deal in July 2007. In light of the current poor economic climate, Hexion also claimed it would be unable to obtain the necessary financing.

But Delaware Court of Chancery Judge Stephen P. Lamb rejected Hexion's claims and determined that the company knowingly and intentionally breached the merger agreement. He has ordered Hexion to use all reasonable best efforts to satisfy the conditions of the merger and has prohibited it from terminating the agreement.

"Apollo's misguided attempt to use 2008's turbulent energy and financial markets to construct a solvency issue where none existed has now been exposed," Huntsman Corp. CEO Peter R. Huntsman says. He is calling on Hexion to fulfill its obligations and proceed to closing. If it doesn't, Hexion could be liable for damages above a $325 million breakup fee.

As the merger deal grew acrimonious, shareholders saw Huntsman Corp.'s market value drop by about $3.7 billion. In a separate Texas lawsuit, Huntsman Corp. still seeks more than $3 billion in damages from Apollo. It claims that the private equity firm interfered with and lured Huntsman Corp. away from a merger with Basell, only to renege on the Hexion deal.

"We have claimed all along that Apollo would resort to any means necessary to break a legal and binding contract," Chairman Jon M. Huntsman says. "Apollo was dishonest and untruthful and lost the case."

In a statement, Hexion expressed disappointment with Judge Lamb's decision and said it would review its options. However, the company is seen as having little room to maneuver. Meanwhile, Huntsman Corp. has sued Credit Suisse and Deutsche Bank, taking the position that the banks should honor their previous commitment to provide financing.

Chemical & Engineering News

ISSN 0009-2347

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