Hexion Specialty Chemicals Inc. wants out of its $10.6 billion offer to acquire Huntsman Corp. - but Huntsman intends to make Hexion stick to the original deal.
Columbus, Ohio-based Hexion offered $28 per share to buy Huntsman of Salt Lake City in mid-2007. But Hexion - which ranks as the world's largest maker of thermoset plastics - filed suit in chancery court in Delaware June 18 saying the capital structure for the deal ``is no longer viable because of Huntsman's increased net debt and its lower-than-expected earnings.''
Hexion ``does not believe that the banks will provide the debt financing for the merger,'' officials said in a June 18 news release. The planned pullout sent Huntsman stock tumbling 40 percent, to less than $13 per share, on June 19. The stock was priced at $12.60 in early trading June 20.
Hexion officials don't believe the firm is obligated to pay a $325 million breakup fee to Huntsman, as spelled out in the original agreement, Hexion spokesman Pete Loscocco said by phone June 19.
Huntsman countered on June 19, with officials saying the specialty chemicals firm ``intends to vigorously enforce all of its rights under the merger agreement and seek to consummate the merger on the agreed terms.''
``These actions appear to be a blatant attempt to deprive our shareholders of the benefits of the merger agreement that was agreed to nearly a year ago,'' said Peter Huntsman, Huntsman president and chief executive officer, in a June 19 news release.
Huntsman's financial struggles - including a $172 million loss in 2007 and an 85 percent drop in first quarter profit - qualify as a ``material adverse effect'' as defined in the merger agreement, according to Hexion officials.
``While both Hexion and Huntsman can be successful as separate companies, they cannot now support the debt load that was agreed to at the time the transaction was put together,'' said Craig Morrison, Hexion chairman, president and chief executive officer, in his firm's news release.
No court dates have been set in the case.