Huntsman Corp. terminated its $6.5 billion agreement to be acquired by Apollo Management’s Hexion Specialty Chemicals, Inc. and settled its lawsuit against the private equity firm for $1 billion. This was another in a series of merger agreements to fall apart amid the credit crisis. For example, a $28.3 billion leveraged buyout of BCE collapsed after the Canadian telecommunications company failed to pass a solvency test by its auditors. The Hexion-Huntsman deal had been in a legal battle for months in July, 2007. Apollo’s Hexion Specialty Chemicals unit had agreed to buy Huntsman, a specialty chemicals maker.
The deal faltered amid the credit crisis and legal battles as Apollo tried to get out of the deal. Apollo cited insolvency concerns about the combined company. It should be noted that Huntsman will continue its lawsuit against Credit Suisse and Deutsche Bank in Texas. Huntsman contends that those banks conspired with Apollo and interfered with Huntsman’s prior merger pact with a previous suitor, Basell. A jury trial on those claims is set to begin on May 11, 2009.
Under the settlement with Apollo, Huntsman will receive a $325 million break-up fee. Hexion said it had commitments from Credit Suisse and Deutsche Bank to fund the termination fee. Affiliates of Apollo will also make cash payments to Huntsman totaling $425 million. In addition, certain Apollo affiliates will pay Huntsman an extra $250 million in exchange for ten-year convertible notes issued by Huntsman. Payments of $500 million were to go to Huntsman on or before December 31st, with any remaining payments that weren’t made by that date to be made on or before March 31, 2009. Separately, an Apollo affiliate agreed to make a $200 million investment in Hexion’s parent company.
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