Huntsman CEO supports deal with Hexion
Thursday September 11, 7:45 pm ET
Huntsman chief executive testifies in support of Hexion buyout
WILMINGTON, Del. (AP) -- The proposed $6.5 billion buyout of chemical company Huntsman Corp. by Hexion Specialty Chemicals would be advantageous to both companies, Huntsman chief executive Peter Huntsman said Thursday.
Testifying in a court battle that will decide whether Ohio-based Hexion should be forced to go through with its a $28-per-share buyout offer, Huntsman also asserted that the combined company could be operated as a viable entity, despite significant debt resulting from the highly leveraged buyout.
Hexion, an affiliate of Apollo Management LP, announced in June that it was backing away from the deal because Huntsman's deteriorating finances no longer made it viable. Hexion, which maintains that a combined company would be insolvent, is suing Utah-based Huntsman in Delaware to free itself of the deal and a $325 million breakup fee.
Huntsman testified that there would be significant benefits in creating what would be one of the world's largest specialty chemicals, and that the combined company would have an expanded global presence and increased purchasing power.
"I saw a great deal of advantages," he said, noting that the delay in closing the deal has created uncertainty among Huntsman's employees, customers and suppliers, and that business could be lost if suppliers look for customers elsewhere.
While Hexion chief executive Craig Morrison testified that synergies resulting from the merger would be limited to about $250 million, Huntsman said that was merely "a good start," and that the revenue and cost benefits compared to two stand-alone companies could exceed $400 million.
Huntsman said higher raw material costs and foreign currency exchange rates have resulted in a drag on earnings, but that his company still has strong positions in all of it core businesses, including a polyurethane division that accounts for more than half of its earnings before interest, taxes, depreciation, and amortization.
In his cross-examination, Hexion attorney Peter Hein noted that even as a buyout was being arranged in June 2007, Huntsman failed to provide Hexion with updated earnings projections for 2007 that showed downward revisions for its pigment business.
"We had made the decision not to do," Huntsman said.
Hein also noted that other chemical companies that have been hit by increases in raw material costs have performed better than Huntsman.
Huntsman's shares rose 88 cents, or 8.1 percent, to $11.71 Thursday.
Source: Associated Press
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