Will Huntsman Jilt Basell for Hexion?


Just as polyolefin producer Basell and chemical manufacturer Huntsman Corp. seemed destined for marriage, thermoset resins producer Hexion Specialty Chemicals has interrupted their plans with a separate acquisition proposal for Huntsman.

Hexion, owned by an affiliate of Apollo Management L.P., sent Huntsman a proposal last week to acquire all its outstanding common stock for $10.4 billion, or $27.25 per share in cash. On Monday, Hexion sweetened the pot to $10.5 billion, or $28 per share. Basells offer for Huntsman, announced June 26, was valued at $9.6 billion, or $25.25 per share.

Our board of directors is in contact with both Hexion and Basell, Huntsman spokesman Russ Stolle told Lube Report. Theres a process that is detailed in the Basell agreement with us.

According to Huntsman, the Basell agreement may be terminated under certain circumstances, including if the company receives a superior proposal and provides advance notice to Basell. If the Basell agreement is terminated under such circumstances, Basell will be entitled to a $200 million payment. Hexion has agreed to directly fund $100 million of the payment, subject to reimbursement by Huntsman if the transaction with Hexion is not consummated.

Lubricant and fuel additives are key applications for Huntsmans Jeffamine-brand polyetheramines. They are used as carrier oils, detergents and dispersing agents in lubricant and fuel compositions. Huntsmans world headquarters is in Salt Lake City, and its administrative headquarters is in Woodlands, Texas.

Based in Columbus, Ohio, Hexion Specialty Chemicals bills itself as the worlds largest producer of thermosetting resins, which are used in bonding, binding, and coating applications in a variety of industries. Hexion has more than 100 production and distribution facilities in the Americas, Europe and Asia Pacific, and about 7,500 employees.

In a July 3 internal memo filed with the SEC, Peter Huntsman, president and chief executive officer, confirmed that a committee of independent directors on his companys board is evaluating the terms of the Hexion proposal.

Under certain circumstances permitted in our agreement with Basell, we may terminate our agreement with Basell in favor of a superior proposal, Huntsman said in the memo. We have not done so, but I wanted to let you know that the board is considering the Hexion proposal in accordance with its fiduciary duty to maximize shareholder value. Both Basell and Hexion are very fine companies, and we would be proud to be associated with either of them.

According to a company fact sheet, Hexion was formed in 2005 through the merger of Borden Chemical Inc., Resolution Performance Products LLC and Resolution Specialty Materials, along with the acquisition of Bakelite AG. In 2006, Hexion acquired the decorative coatings and adhesives business of The Rhodia Group, the wax business of Rohm and Haas, and the ink and adhesive resins business of Akzo Nobel.

A Hexion spokesman told Lube Report on Friday the company would not comment on the acquisition proposal beyond the information outlined in its press releases.

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