Huntsman shareholders commit $217 million, Apollo adds $210 million to close merger with Hexion

By Lisa Kerner

Charlotte, N.C., Oct. 27 - Hexion Specialty Chemicals, Inc. said some Huntsman Corp. stockholders agreed to make an additional cash commitment to Huntsman of approximately $217 million, conditioned upon closing of the merger of the two companies.

An investor group led by D.E. Shaw and Citadel Investment Group, LLC provided a revised backstop letter that provides Huntsman with certainty that at least $446.54 million in cash will be added to the balance sheet of the combined company at closing, it was reported in a schedule 13D filed with the Securities and Exchange Commission.

The backstop is conditioned in part on the merger closing on or before Nov. 2, although the date may be extended, the filing noted.

The total amount of committed payments from Huntsman stockholders is approximately $677 million, a Hexion news release said.

Funds managed by affiliates of Apollo Management, LP also agreed to make an additional cash equity investment of $210 million in Hexion, bringing the total cash equity investment by the funds to $750 million.

The cash equity investment is also conditioned upon closing of the merger and the funding of the Huntsman stockholder commitments, Hexion said.

"Hexion is ready to close the Hexion Huntsman merger and, if our lenders fail to provide the funding pursuant to their commitment letters, Hexion intends to diligently enforce its rights against them," Hexion chief executive officer Craig Morrison said in the release.

Merger stalled by lawsuits, solvency issues

On July 12, 2007, Hexion agreed to acquire Huntsman in an all-cash transaction valued at approximately $10.6 billion, including the assumption of debt. Huntsman shareholders approved the deal in October 2007.

In June, Hexion claimed the combined company would be insolvent and said Huntsman's increased net debt and its lower-than-expected earnings were to blame.

The Delaware Court of Chancery in September ruled in favor of Huntsman and ordered Hexion to close the deal.

The Court of Appeals for the Ninth District of Texas awarded a temporary injunction in favor of Huntsman earlier in October, enjoining affiliates of Credit Suisse and Deutsche Bank from filing any lawsuit that alleges that the combined company would be insolvent or would be incapable of paying off its notes to the banks.

Last week, it was reported that Huntsman has received a written opinion from American Appraisal Inc. that the company to be formed from the pending merger of Hexion and Huntsman would be solvent.

Huntsman's claims against the banks were consolidated with the company's previously filed claims against Apollo Management, Leon Black and Joshua Harris.

A jury trial is set to begin on Feb. 9. Huntsman is seeking more than $3 billion in actual damages, plus exemplary damages, attorneys' fees and interest, Huntsman said previously.

Based in Columbus, Ohio, Hexion makes thermoset resins. Huntsman is a Salt Lake City manufacturer of differentiated chemicals and pigments.

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