Huntsman Is On A Roll

HUNTSMAN CORP.'S BID to force Hexion Specialty Chemicals to acquire it is gaining steam. Hexion's parent company, the private equity firm Apollo Management, is providing $540 million in funding to help Hexion complete the $10.6 billion purchase. And Huntsman has won an injunction against two banks it has accused of trying to scuttle the deal.

A sharp increase in Huntsman's share price since the Apollo financing was announced on Oct. 9 suggests growing confidence on Wall Street that the deal will be consummated. Huntsman shares climbed 28% to $11.64 that day. But Huntsman is still trading at a significant discount to the $28.00-per-share acquisition price.

Apollo's move is a response to a judgment against Hexion last month in its lawsuit in the Delaware Court of Chancery seeking permission to back out of the deal. In that suit, Hexion argued both that the combined company would be insolvent and that, owing to Huntsman's increased debt, alternate financing was necessary to complete the merger.

The court, siding with Huntsman, ordered Hexion to "perform all of its covenants and obligations" under the merger agreement.

To that end, Hexion also recently agreed to sell its specialty epoxy resins business to Czech resins maker Spolchemie, fulfilling antitrust requirements imposed on the deal (C&EN, Sept. 29, page 18). The Delaware court found that Hexion had been "dragging its feet" in receiving such regulatory clearance.

Joel I. Greenberg, a mergers and acquisitions attorney with the New York City-based law firm Kaye Scholer, predicts that the deal will close. "The Delaware case was a close-to-total victory for Huntsman and didn't leave Hexion a lot of maneuvering room," he says. He notes that the court made clear that the damages Hexion faces in the case are not limited to the contractual $325 million breakup fee between the companies. "In his opinion the judge hinted that there will be substantial damages if they don't close," Greenberg explains.

Last week, Huntsman also won a decision in a Texas District Court prohibiting Credit Suisse and Deutsche Bank, the two banks providing financing for the merger, from filing a lawsuit seeking to declare the combined company insolvent. The Texas court also consolidated Huntsman's claims against the banks into its $3 billion-plus lawsuit against Apollo.