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TMCNet: Huntsman chief digs in: CEO promises to press fight over Hexion's withdrawn offer

[July 03, 2008]

Huntsman chief digs in: CEO promises to press fight over Hexion's withdrawn offer

(Houston Chronicle (KRT) Via Acquire Media NewsEdge) Jul. 3--Huntsman Corp. isn't finished fighting to save its multibillion-dollar merger deal with a reluctant Hexion Specialty Chemicals.

"I don't care if they like the deal or not," CEO Peter Huntsman said in an interview Wednesday. "They have signed an agreement to buy this asset, and I intend to hold them to that."

Hexion, a portfolio company of New York private equity firm Apollo Management, said last month it was withdrawing its $28-a-share takeover offer for Huntsman amid doubts the deal still made economic sense.

But on Wednesday, Huntsman again signaled it had no intention of walking away from the nearly $11 billion deal.

The chemical maker, based in Salt Lake City and run from The Woodlands, said its board approved a second 90-day extension of the deadline for closing the deal.

The deadline, which had been Friday, is set for Oct. 2.

It also countersued Hexion in Delaware court for breach of contract, defamation and other claims. The suit came in response to a lawsuit in mid-June by Columbus, Ohio-based Hexion that sought to terminate the year-old merger agreement.

Hexion cited concerns that Huntsman's recent poor financial results, mounting debt and uncertain prospects would make the merged company insolvent.

Given those concerns, Hexion CEO Craig Morrison said Wednesday he was puzzled why Huntsman would extend the deadline for closing the merger.

That should only happen if there is an "objectively reasonable probability" the transaction can be completed within the alloted time, he said.

"We do not understand how Huntsman's board of directors could in good faith make that determination," Morrison said in a statement.

He also said claims in Huntsman's countersuit were "without merit."

Damaging breakup

Huntsman's countersuit in Delaware will seek a $325 million reverse-breakup fee if the deal doesn't go through, as well as unspecified damages to shareholders.

Peter Huntsman said those damages could reach upwards of $4.5 billion, given the sharp drop in Huntsman's stock price since Hexion announced it wanted out of the merger.

On Wednesday, Huntsman shares fell 37 cents to $10.77 in trading on the New York Stock Exchange.

The merger between Huntsman and Hexion was supposed to create a company with sales of $14 billion and more than 21,000 workers at 180 sites worldwide, the companies said at the time.

And up until mid-June, everything seemed to be going according to plan, Peter Huntsman said.

The day of Hexion's lawsuit, Hexion had senior managers in Salt Lake City working on integration plans and dotting the i's on the agreement, he said. Then there was a call, the managers left the room and they didn't come back.


Huntsman was in Brussels that day visiting a company site. He said he received a call from Hexion's Morrison shortly before 11 p.m., saying the deal could not go forward and that a lawsuit was coming.

"My response was, 'What are you talking about?' " Huntsman said.

The confusion would escalate into all-out war during the following weeks.

Yet the rationale for the deal still has not changed, nor has the fundamental health of Huntsman, its CEO said.

Despite recent weaker returns, the company's earnings are down only 6 percent in the 12 months since the July 2007 merger announcement versus the 12 months leading up to it, he said.

Such a drop should not be considered a "material adverse effect," he said, referring to Hexion's claim that Huntsman's declining financial performance has made the merger a bad idea.

Costs passed on

While Huntsman has seen $1.5 billion in additional costs in the last 18 months, because of rising raw material and energy costs, it has passed on 98 percent through price increases to customers and is seeing financial results improve, Peter Huntsman said.

He added that he believes Hexion's parent, Apollo, has deliberately tried to delay the deal and create enough problems to force Huntsman back to the bargaining table and negotiate a lower price, charges that Hexion denies.

"If this prevails," Huntsman said, "there's not a merger agreement in America that will be worth the paper it's written on. It's ridiculous."

brett.clanton@chron.com

To see more of the Houston Chronicle, or to subscribe to the newspaper, go to http://www.HoustonChronicle.com.

Copyright (c) 2008, Houston Chronicle
Distributed by McClatchy-Tribune Information Services.
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