Columbus, Ohio - Hexion Specialty Chemicals Inc. and related entities have filed suit in the Delaware Court of Chancery to declare its contractual rights with respect to its $10 600-million merger agreement with Huntsman Corp., the company announced in a18 June statement.
Hexion said in the suit that the capital structure agreed by Huntsman and Hexion is no longer financially viable because of Huntsman's increased net debt and its lower than expected earnings.
The filing also disclosed that its board has received an opinion from Duff & Phelps llc. which says that, based on the capital structure agreed with Huntman at the time the agreement was signed, the combined companies, although individually solvent, would be insolvent.
The suit alleges that because of this, Hexion does not believe that the banks will provide the debt financing for the merger contemplated by their commitment letters.
Hexon also stated in the suit that it would continue to make "reasonable best efforts" to close the transaction, which includes obtaining all necessary antitrust and regulatory approvals as required by the merger agreement.
"While both Hexion and huntsman can be successful as separate companies, they cannot now support the debt load that was agreed at the time the transaction was put together," said Craig Morrison, Hexion's chairman, president and ceo, in the Hexion statement.
He continued, "We continue to have enormous respect for Huntsman and still believe that a combination of the two companies would offer significant benefits. However the financing for the acquisition is predicated on a certain level of financial performance, and given the increase in Huntsman's total debt and decrease in earnings, Hexion does not believe that the transaction can be completed."
Morrison concluded, "While this development is disappointing, Hexion remains very well positioned to service our customers, compete and grow globally."