Kraton Performance Polymers Inc. said that LCY Chemical Corp. has sent it formal notification that it is terminating the deal that would have seen Houston-based Kraton merge with the styrenic block copolymer operations of LCY.
Now the two sides must determine whether Kraton owes LCY a $25 million break-up fee to withdraw from the deal. LCY said Aug. 8 it would demand the fee, based on terms of the agreement. Kraton, however, maintains it should not have to pay the fee because a July 31 explosion in a gas pipeline in Kaohsiung, Taiwan, that transports propylene gas to LCY qualifies as a “material adverse effect” on LCY under the combination agreement, originally announced at the end of January.
Kraton informed LCY on June 30 that it intended to withdraw its recommendation that shareholders approve the combination agreement unless the two parties agreed to revised terms. Kraton said the operating results for LCY's SBC business had declined in this year's first quarter and that an SEC filing discussing a decline in forecasted results led to a decline in Kraton's stock price and negative reactions from stockholders.
Despite “numerous discussions” between the parties since June 30, Kraton said that LCY informed the Houston firm Aug. 4 that it would no longer negotiate and would not agree to any revision in terms from the original deal.