Hexion Files Suit Alleging That Transaction with Huntsman is No Longer Viable
June 18 2008 - 4:53PM
Business Wire
Hexion Specialty Chemicals, Inc. (�Hexion�) announced today that it
and related entities have filed suit in the Delaware Court of
Chancery to declare its contractual rights with respect to its
$10.6 billion merger agreement with Huntsman Corporation
(�Huntsman�) (NYSE: HUN). Hexion said in the suit that it believes
that the capital structure agreed to by Huntsman and Hexion for the
combined company is no longer viable because of Huntsman�s
increased net debt and its lower than expected earnings. While both
companies individually are solvent, Hexion believes that
consummating the merger on the basis of the capital structure
agreed to with Huntsman would render the combined company
insolvent. The suit alleges that in light of this conclusion,
Hexion does not believe that the banks will provide the debt
financing for the merger contemplated by their commitment letters.
Hexion stated in its suit that, while it will continue to use its
reasonable best efforts to close the transaction, which includes
obtaining all necessary antitrust and regulatory approvals as
required by the merger agreement, it does not believe that
alternate financing will be available. Hexion disclosed in the
filing that its Board of Directors has received an opinion from
Duff & Phelps, LLC, a leading provider of independent financial
advisory and investment banking services, concluding that, based on
the capital structure agreed to by the parties at the time the
merger agreement was signed, the combined company would be
insolvent based on the fact that it would not meet the standard
tests of solvency and capital adequacy set forth in the opinion.
The suit also alleges that in light of the substantial
deterioration in Huntsman�s financial performance, the increase in
its net debt and the expectation that the material downturn in
Huntsman�s business will continue for a significant period of time,
Huntsman has suffered a material adverse effect as defined in the
merger agreement. �While both Hexion and Huntsman can be successful
as separate companies, they cannot now support the debt load that
was agreed to at the time the transaction was put together,� said
Craig O. Morrison, Hexion�s Chairman, President and CEO. �We
continue to have enormous respect for Huntsman, the Huntsman family
and management team and still believe that a combination of the two
companies would offer significant strategic benefits. However, the
financing for the acquisition is predicated on a certain level of
financial performance and, given the increase in Huntsman�s total
debt and decrease in earnings, Hexion does not believe that the
transaction can be completed.� Mr. Morrison continued: �While this
development is disappointing, Hexion � with its long-dated, stable
capital structure, no significant debt maturities until 2013, and
with more than $475 million in liquidity -- remains very well
positioned to service our customers, compete and grow globally.�
About Hexion Specialty Chemicals Based in Columbus, Ohio, Hexion
Specialty Chemicals serves the global wood and industrial markets
through a broad range of thermoset technologies, specialty products
and technical support for customers in a diverse range of
applications and industries. Hexion Specialty Chemicals is
controlled by an affiliate of Apollo Management, L.P. Additional
information is available at www.hexion.com. Forward Looking
Statements Certain statements in this press release are
forward-looking statements within the meaning of Section�27A of the
Securities Act of 1933, as amended and Section�21E of the
Securities Exchange Act of 1934, as amended. In addition, the
management of Hexion Specialty Chemicals, Inc. (which may be
referred to as �Hexion,� �we,� �us,� �our� or the �Company�) may
from time to time make oral forward-looking statements. Forward
looking statements may be identified by the words �believe,�
�expect,� �anticipate,� �project,� �plan,� �estimate,� �will� or
�intend� or similar expressions. Forward-looking statements reflect
our current views about future events and are based on currently
available financial, economic and competitive data and on our
current business plans. Actual results could vary materially
depending on risks and uncertainties that may affect our markets,
services, prices and other factors as discussed in our 2007 Annual
Report on Form 10-K, and our other filings, with the Securities and
Exchange Commission (SEC). Important factors that could cause
actual results to differ materially from those in the
forward-looking statements include, but are not limited to:
economic factors such as an interruption in the supply of or
increased pricing of raw materials due to natural disasters,
competitive factors such as pricing actions by our competitors that
could affect our operating margins, risks related to the litigation
referred to in this news release and regulatory factors such as
changes in governmental regulations involving our products that
lead to environmental and legal matters as described in our 2007
Annual Report on Form 10-K, and our other filings, with the SEC.
Other Information The full text of the Duff & Phelps� opinion,
dated June 18, 2008, which is on public file with the Delaware
Court of Chancery and will be filed in an Exhibit to a Hexion Form
8-K filing with the SEC, is subject to the limitations,
qualifications and assumptions contained in the opinion.
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