The long-delayed merger of Huntsman Corp. and Hexion Specialty Chemicals Inc. has been canceled. Hexion and its private equity owner, Apollo Management LP, will pay Huntsman a total of $1 billion, according to Huntsman.
The payments include a $325 million break-up fee that was included in the merger agreement, plus $425 million in cash payments, and an additional $250 million in exchange for 10-year convertible notes issued by Huntsman in that principal amount.
At least $500 million must be paid to Huntsman by Dec. 31, and the rest by March 31, according to a Huntsman news release. The settlement resolves Huntsman's court claims against Apollo.
``We are pleased to have reached this agreement with Hexion and Apollo. Receipt of these proceeds will enhance the strength of Huntsman's balance sheet and better position our company to prosper during the current turbulence in the global economy,'' Huntsman President and Chief Executive Officer Peter Huntsman said in the news release.
``Additionally, our associates, customers and suppliers can now put the uncertainty concerning the outcome of the merger with Hexion behind them.''
Leon Black, chairman of Apollo Global Management LLC, added: ``We are happy to be resolving this situation in the best interest of our investors. It puts to an end the six-month disagreement and distraction between our companies. As the majority stakeholder in Hexion and now an investor in Huntsman, we look forward to both companies traversing this economic cycle and prospering.''
Huntsman is still pursuing a multibillion-dollar lawsuit against Credit Suisse and Deutsche Bank, which originally were supposed to finance the Hexion-Huntsman merger.
Columbus, Ohio-based Hexion and Apollo Management LP had sought to cancel the $10.6 billion deal they had in place for Salt Lake City-based Huntsman, on the grounds that Huntsman's financial situation had worsened considerably since the deal was announced in mid-2007. But the Delaware Court of Chancery ruled Sept. 29 that Hexion had to complete the deal, saying that Hexion ``intentionally breached a number of obligations.''
Huntsman had been seeking $3 billion in damages from Hexion and Apollo partners Leon Black and Joshua Harris through a suit filed in state court in Conroe, Texas, where portions of Huntsman's business are based.
The Wall Street Journal's Web site reported that the deal settling the dispute between Huntsman and Apollo was hammered out in a one-on-one negotiation between Black and Huntsman founder Jon Huntsman.