Huntsman Merger Gets An Acid Bath (HUN)

If you thought that the mid-single digit billion dollar mergers were safe from being terminated, think again.  Huntsman Corp. (NYSE: HUN) is being destroyed in after-hours trading after Hexion Specialty Chemicals announced that it has filed suit in Delaware to exit its contractual obligations to acquire the company.

The Hexion-led investor group is seeking to terminate its rights in the proposed $10.6 Billion acquisition of Huntsman Corp.  Hexion has said in this suit filed that it believes that the capital structure agreed to by both Huntsman and by Hexion for the combined company is no longer viable.

The reasons noted are because of Huntsman’s increased net debt and its lower than expected earnings.  Hexion notes that both companies are individually solvent but it believes that the merger’s capital structure previously agreed to would render the combined company insolvent.

Hexion also said in its filing that it does not believe that the banks will provide the debt financing for the merger that was contemplated by their commitment letters. Hexion stated in its suit that, while it will continue to use its reasonable best efforts to close the transaction, which includes obtaining all necessary antitrust and regulatory approvals as required by the merger agreement, it does not believe that alternate financing will be available.

If you have been following this merger for very long you will know this deal looked on the rocks from the start.  The company traded as high as $28.00 after the deal came to light in 2007 and the stock was north of $25.00 on January 1, 2008.  It has steadily slid down to almost $20.00 before this merger was terminated.

Unfortunately this stock is down at $13.50 on heavy trading volume in after-hours trading.  Huntsman has been its own public entity since early in 2005.  The prior lows had been around $16.00 and the 52-week trading range was $18.70 to $28.40.  Kiss this one goodbye.

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Jon C. Ogg
June 18, 2008