Pentwater opts out of shareholder group, reports options to buy, sell Huntsman shares

By Lisa Kerner

Charlotte, N.C., Sept. 5 - Huntsman Corp. shareholder Pentwater Capital Management LP said it is no longer part of the group of investors that sought to facilitate the merger of Huntsman and Hexion Specialty Chemicals, Inc.

Pentwater, with a 0.45% stake in Huntsman, said it disclaims membership in the group for multiple reasons, including the requirement that the commitment letter be accepted by Hexion, according to a schedule 13D filed with the Securities and Exchange Commission.

Hexion said the investor group's proposal did not come close to making the combined company solvent.

It was previously reported that the Huntsman family was expected to join the shareholder initiative, led by Citadel Investment Group, LLC and D.E. Shaw & Co., LP, to invest $500 million in Hexion to close the merger.

The financing would be in the form of a subscription for contingent value rights.

Citadel and D.E. Shaw said their own commitments of $245.02 million are subject to Hexion's receipt of similar commitments from a limited number of other large investors in Huntsman so that the total amount of all contingent value rights commitments is at least $500 million, according to a prior news release.

While Hexion agreed to acquire Huntsman for $10.6 billion in July 2007 and Huntsman shareholders approved the deal in October 2007, Hexion declined to extend the merger agreement in June.

Hexion, a Columbus, Ohio, thermoset resin maker, believes that completing the merger would render the combined company insolvent.

As of Aug. 28, Pentwater held options to buy 500,000 common shares of Huntsman at exercise prices of between $15.00 and $17.50 per share as well as options to sell 1,698,700 common shares at prices between $17.50 and $20.00 per share.

Pentwater and its affiliates entered into cash-settled total return swap transactions with certain dealers, giving the investors long economic exposure to the total return on 3.5 million common shares, or approximately 1.49% of the common shares outstanding.

According to the filing, the swaps do not give the reporting persons voting, investment or dispositive control over any securities of Huntsman.

Huntsman is a Salt Lake City manufacturer of differentiated chemicals and pigments.

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