Huntsman Spurns Basell, Accepts Hexion Offer


Huntsman Corp. on Thursday left its original suitor at the altar, canceling a June 26 merger agreement with polyolefins maker Basell in favor of a $10.6 billion, or $28 per share, offer from thermoset resins producer Hexion Specialty Chemicals Inc., an affiliate of Apollo Management L.P.

Woodland, Texas-based Huntsman said its board of directors authorized delivery of a notice of termination of the Basell agreement, along with payment of a required $200 million break-up fee — $100 million of it funded by Hexion.

On July 11, Hoofddorp, Netherlands-based Basell confirmed it would stand by its original $25.25 a share offer for Huntsman. On June 26, 2007, Basell and Huntsman signed a merger agreement which valued Huntsman at a full and fair price, and offered certainty and the ability to close rapidly, a Basell statement read. Basell understands that the Hexion offer faces a lengthy and complex regulatory approval process, and that closing the Hexion transaction will require many months and is subject to uncertainty.

Salt Lake City-based Hexion will have up to 12 months, subject to a 90-day extension by the Huntsman board of directors under certain circumstances, to close the transaction. The agreement also provides that the cash price per share to be paid by Hexion will increase 8 percent per year (including any dividends paid), beginning nine months from July 12. Pending regulatory approvals, Huntsman expects the deal to close in the first quarter of 2008.

In a July 12 internal memo to employees, filed with the SEC, President and Chief Executive Officer Peter Huntsman said it will likely be some time before Hexion is able to close on the transaction with Huntsman. Because under applicable law, our board of directors may be required to consider a proposal superior to Hexions, should one be presented to the company in the coming days, it will not be until at least the latter part of next week before members of our senior management team can begin to meet with you to discuss the Hexion transaction, he said.

Craig Morrison, chairman and CEO of Hexion, said the merger will create a company with a a greatly expanded global reach – particularly in the high-growth Asia-Pacific region.

Hexion has a variety of manufacturing and distribution facilities, and sales and administrative offices, in Asia, including locations in China, Korea, Japan, Singapore, Taiwan, Thailand and Malaysia.

Huntsman in January said its first Asia Pacific polyetheramines site, which broke ground in Jurong Island, Singapore, in November 2005, was on schedule and expected to begin commercial production in the third quarter of this year. The new plant will produce 30 million pounds annually, complementing Huntsmans larger polyetheramines facilities in Conroe, Texas, and Llanelli, Wales.

Lubricant and fuel additives are key applications for Huntsmans polyetheramines. They are used as carrier oils, detergents and dispersing agents in lubricant and fuel compositions. BASF is the other major global supplier of the chemical.

Joshua Harris, founding partner with Apollo Management, said the acquisition will build Hexion into one of the worlds largest specialty chemical companies. The combined enterprise will have annual sales of more than $14 billion and more than 21,000 associates and 180 facilities around the world, Harris said.

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.

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