Huntsman Says Yes to Hexion

HUNTSMAN CORP. has agreed to be acquired for the second time in three weeks. The company is accepting a $10.6 billion takeover bid from thermoset resin maker Hexion Specialty Chemicals, which is backed by private equity firm Apollo Management.

Hexion's offer, delivered in a one-two punch, successfully overturned a June 26 merger agreement, worth $9.6 billion, with polyolefins maker Basell, owned by the private industrial group Access Industries. On July 3, Hexion offered $27.25 per share for Huntsman, beating Basell's $25.25-per-share price. Even after the transaction committee of Huntsman's board of directors declared the Hexion bid "superior" to its previous agreement with Basell, Hexion sweetened its own proposal with a $28.00-per-share offer.

The Huntsman family and private equity firm MatlinPatterson, which collectively own 57% of Huntsman's shares, have agreed to the deal. It values Huntsman's stock at $6.5 billion and includes about $4 billion in debt.

The deal will mark the end of the road for Huntsman Corp., which for most of its life has been a family-owned company built through founder Jon M. Huntsman's engineering of highly leveraged deals for unwanted chemical plants. "The time has come when it is in the best interests of our shareholders to sell the company," he says in a statement about the Hexion agreement.

Hexion is more like Huntsman than Basell is. Hexion's core business of thermoset resins has synergies with Huntsman's epoxy resin and polyurethane operations. Their combined sales would be about $14 billion annually.

But trying to combine two of the largest epoxy resin businesses in the world could raise red flags at antitrust authorities. Basell pointed this out last week when it said it wouldn't increase its own bid. "Basell understands that the Hexion offer faces a lengthy and complex regulatory approval process and that closing the Hexion transaction will require many months and is subject to uncertainty," the company said.