War of words continues in stalled merger of Huntsman, Hexion Specialty Chemicals

By Lisa Kerner

Charlotte, N.C., July 28 - Huntsman Corp. said there is a "fundamental disconnect" between it and Hexion Specialty Chemicals, Inc. regarding Hexion's obligations to secure financing to complete the merger of the two companies.

"When the required antitrust/competition conditions are satisfied (and we remind you of your hell-or-high-water obligation in that regard), and the court has determined that no material adverse effect has occurred, you will be expected to close the merger," Huntsman said in a July 28 letter to Hexion.

Huntsman also noted that Hexion assumed all financing risk in connection with the merger.

The letter, in response to a July 25 letter from Hexion, was included in a form 8-K filed with the Securities and Exchange Commission.

According to Huntsman, Hexion agreed to provide it with a solvency letter opining that, immediately after the consummation of the merger, the post-merger Hexion would be solvent.

The obligation to provide the letter is not tied to Hexion's financing or alternate financing, Huntsman noted.

Hexion's failure to seek additional or supplemental financing is an intentional breach of the merger agreement, Huntsman alleged.

Search for additional financing

Huntsman also repeated its request for Hexion to consent to provide confidential information, including, but not limited to, the commitment letter, to potential investors.

It was previously reported that Hexion told Huntsman to direct all its inquiries about obtaining alternate financing to Gleacher Partners.

According to Hexion's letter, Gleacher twice requested that Huntsman provide it with updated five-year projections and hold a meeting or call to explain the significant variance between Huntsman's budgeted results for 2008 versus its actual results and the implications for the projected results for the company over the next five years.

Hexion added that it also would ask Credit Suisse and Deutsche Bank to allow Gleacher to provide the banks' commitment letter to potential investors, if appropriate.

In its letter, Hexion took issue with what it called Huntsman's mischaracterization of Hexion's obligations under the merger agreement and said there is no obligation under the agreement to seek "additional" or "supplemental" financing.

Hexion said its only obligation is to seek alternate financing to replace the commitment letter if it becomes unavailable.

Huntsman, in a prior letter, asked Hexion for permission to share confidential Hexion information and materials with financial investors that have expressed an interest in providing supplemental financing to Hexion in connection with the companies' merger.

In June, Hexion declined to extend the merger agreement and said the capital structure agreed to for the combined company is no longer viable and that completing the merger would render the combined company insolvent.

Hexion filed a motion in early July asking the Court of Chancery of the State of Delaware to determine that it is not obligated to consummate the merger.

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.

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

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.