Huntsman shares plummet as players head to court; Apria to be acquired by Blackstone

By Paul A. Harris

St. Louis, June 19 - Shares of Huntsman Corp. (NYSE: HUN) plunged 38.35% in Thursday trading, trailing news late Wednesday that Hexion Specialty Chemicals, Inc., a subsidiary of Apollo Management, filed suit in Delaware Chancery Court contending that a material adverse effect has rendered the $28 per share, $10.6 billion merger deal untenable.

Hexion believes that the merged entity's capital structure is no longer viable because of Huntsman's increased net debt and its lower than expected earnings, and that consummating the merger on that basis would render the combined company insolvent.

Hexion also does not believe that the banks will provide the committed debt financing for the merger.

A special situations equities analyst, speaking on background just after Thursday's close, said that Wednesday's news "kind of caught everyone by surprise."

Noting that Hexion is seeking to be liable for an amount limited by the deal's $325 million termination fee, the analyst said that "nobody wants to do a highly leveraged deal at a time like this, with a company that appears to be facing potential difficulty in servicing the payments."

Prospect News asked the analyst whether a renegotiated deal, such as the one recently struck in the merger deal between Clear Channel Communications and sponsors Bain Capital Partners LLC and Thomas H. Lee Partners LP, in which the per-share price was reduced to $36 from $39.20, lowering the purchase price to $17.9 billion from $22 billion, might be possible in the Huntsman situation.

The analyst would not rule it out, but specified that Huntsman is shopping around assets in order to get regulatory approval from the European Union.

Any new deal would have to factor in what type of assets Huntsman divests, the analyst said.

The analyst estimates that, absent the merger deal, Huntsman should trade at $12.50 per share.

The shares closed Thursday at $12.86, down $8.00 on the day.

Meanwhile, Huntsman has expressed its intension of consummating the merger at the original $28 per share price.

"Obviously Huntsman doesn't want the termination fee because it would be much better off doing the deal," the analyst said, adding that Hexion's "material adverse conditions" assertion could prove to be a difficult one to prove in court.

Blackstone to acquire Apria Healthcare

Elsewhere Thursday shares of Apria Healthcare Group Inc. (NYSE: AHG) climbed 26.42%, or $4.18 on the day to close at $20.00, on news that Apria has agreed to be acquired by the Blackstone Group in a $21 per share all-cash deal valued at $1.6 billion.

The $21 per share offer represents a premium of approximately 33% over Wednesday's closing price, and a premium of approximately 29% over Apria's $16.22 average closing price for the 30 trading days leading up to Wednesday.

Pending shareholder and regulatory approvals, the deal is expected to occur as early as this September.

A special situations equities analyst, noting that the deal has a "go-shop" provision until July 24, said this one should go forward as scripted.

The source recalled Blackstone's experience in the $1.8 billion PHH Corp. merger that was announced in March 2007.

When Blackstone failed to secure sufficient debt financing prior to the Dec. 31, 2007 closing deadline, PHH terminated the deal, and Blackstone was forced to pay the $50 million reverse breakup fee.

"Right now private equity has a pretty bad name," the analyst said.

"Considering what happened with PHH you figure Blackstone wouldn't jump into this $1.6 billion deal unless they were pretty sure."

Thursday's situations unfolded against a market backdrop that saw all three major U.S. indexes finish in the black.

The Nasdaq far outperformed its two counterparts, advancing 1.33% on the day to finish at 2,462.06, 32.35 higher.

The S&P 500 came in a distant second as it finished 0.38%, or 5.02 points, higher on the day to close at 1,342.83.

The Dow Jones Industrial Average rose 0.28% on Thursday, up 34.03 points to close at 12,063.09.

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