DealZone

Huntsman and Hexion spar anew

July 30, 2008

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Chemical maker Huntsman Corp’s second-quarter earnings have triggered a new round of sparring with its disgruntled suitor, Hexion Specialty Chemicals.

Hexion, a unit of Apollo Management, jumped on Huntsman’ssecond quarterresults, saying they showed that a material adverse change had occurred in Huntsman’s financial condition. Hexion has claimed the $6.5 billion purchase of chemicals maker Huntsman is no longer feasible and the combined company would be insolvent. The two companies have already filed lawsuits against each other.

Hexion said Huntsman’s EBITDA (earnings before interest, taxes, depreciation and amortization) had dropped 19 percent from prior year and its net debt — adjusted for asset sales — was more than 25 percent higher than a year ago.

“These results further demonstrate that Huntsman has suffered a material adverse effect which is the primary reason why the combined company would be insolvent if the transaction were to be completed based on the agreed capital structure,” Hexion said. “Huntsman has provided no information to support its assertion that the combined company would be solvent.”

For its part, Huntsman remained upbeat and said it had been “encouraged by the recent moderation in crude oil and natural gas prices” and it expected adjusted EBITDA in the second half of the year to be stronger than both the first half of this year and the second half of 2007.

Huntsman Chief Executive Peter Huntsman said he hopes litigation with Hexion will be resolved by mid-September, after an expedited hearing. The trial is scheduled to begin on September 8.

Stay tuned.

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