Apollo Management reaches agreement to terminate acquisition of Huntsman Corp.

16-Dec-08

Apollo Management LP has reached an agreement to terminate its acquisition of Huntsman Corp. only after a Huntsman director suggested removal of lawyers from the talks. The ensuing negotiations that lasted fro three days between Black and Jon Huntsman, has resulted in Apollo agreeing to pay Huntsman US$1 bln to end the buyout. Uncertainties about collecting legal awards, as well as weak private equity and chemical markets triggered the change. The US$6.5 bln Huntsman deal that was announced in July 2007, has repeatedly landed in court as Apollo and its banks questioned whether the company would be financially viable after the takeover. Apollo will pay Huntsman US$425 mln in cash and buy US$250 mln of convertible notes that pay 7% annual interest. Apollo's Hexion Specialty Chemicals unit, which was to combine with Huntsman, said it also expects lenders Credit Suisse AG and Deutsche Bank AG to fund a $325 mln breakup fee to Huntsman. Huntsman will net about $850 million, because prior net operating losses will negate taxes on about US$500 mln of the settlement amount as per Bloomberg. The settlement doesn't resolve litigation between Huntsman and Credit Suisse and Deutsche Bank in Montgomery County, Texas. A trial on that lawsuit, which claims that the banks conspired with Apollo and interfered with a prior Huntsman merger agreement, is set to begin on May 11. Apollo has agreed to cooperate with Huntsman in the case.