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Huntsman And Banks Settle

Chemical firm's share price drops after it accepts deal worth $1.7 billion

by Alexander H. Tullo
June 29, 2009 | A version of this story appeared in Volume 87, Issue 26

Huntsman Corp. and the two banks it was suing over a botched merger, Credit Suisse and Deutsche Bank, decided to shake hands rather than duke it out in a Conroe, Texas, court.

As part of the $1.7 billion settlement, the banks each must pay Huntsman $316 million in cash. They will also give Huntsman $550 million apiece in financing under attractive terms.

The settlement was a far cry from the $4.6 billion that Huntsman was seeking in the trial, which began two weeks ago. Huntsman accused the banks of luring it away from a 2007 merger agreement with Basell in favor of a deal with Hexion Specialty Chemicals. Then, after the financial markets tanked and Hexion unsuccessfully sued to break the agreement, Huntsman said the banks failed to provide $15 billion in promised financing, even though an outside appraisal firm attested to the solvency of the combined company.

The banks countered that they have the right to determine whether or not such appraisals are satisfactory. "While we believe strongly in the merits of our case, we felt it was in our best interests to resolve the litigation," the banks said in a statement.

Huntsman will use the proceeds to pay down debt and improve its cash position. CEO Peter R. Huntsman noted that the settlement will "provide us much greater flexibility as we manage our business."

Wall Street reacted negatively to the settlement. Huntsman shares opened on June 23, the day the agreement was announced, at $6.01 per share. By the next day's close, they had declined to $5.29. "The cash settlement was less than expected," wrote Jefferies & Co. stock analyst Laurence Alexander to clients. "We forecasted $1 billion."


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