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Apollo Offers $540m to Complete Huntsman Deal
Hexion Specialty Chemicals announced that it has secured new $540 million commitment from Apollo Management.
October 9, 2008
Hexion Specialty Chemicals said Thursday that it has secured $540 million from its private equity owner, Apollo Management, to complete its $10.6 billion acquisition of Texas chemicals company Huntsman.
Under terms of the new equity commitment, New York-based Apollo has agreed to waive a transaction fee it stood to receive from the acquisition and monitoring fees for the next three years.
Craig Morrison, chief executive of Hexion, said: "We are grateful for Apollo's support as we continue to work towards closing the Huntsman transaction."
Hexion's purchase will give it control of a Woodlands, Texas-based chemicals company with 13,000 employees that generated $10 billion in revenues last year.
The new move by Apollo, which isn't part of any contractual obligation in the merger agreement between Hexion and Huntsman, comes after Delaware court judge Stephen Lamb ordered Columbus, Ohio-based Hexion to complete its $28-per-share purchase of Huntsman last Monday.
Interestingly, Apollo may've been able to avoid making the new investment. Earlier this year, a trio of heavyweight hedge funds--Citadel Investment Group, D.E. Shaw and MatlinPatterson Global Opportunities Partners--had offered to support Huntman's purchase with $500 million in financing, but Apollo declined the capital infusion.
Huntsman had previously sought $3 billion in damages from Apollo and the firm's partners, Leon Black and Joshua Harris after Apollo and Hexion filed suit against Huntsman in June, claiming that the target's increased debt load and deteriorating financial performance would result in an insolvent company once the acquisition was completed.
Huntsman chief executive Peter Huntsman disputed the assessment, saying Huntsman was "a strong and dynamic company." The CEO accused Apollo of attempting to construct a solvency issue where none existed.
Hexion was on the hook for a $325 million termination fee if it didn't complete the purchase of Huntsman. The acquirer offered to buy Huntsman in July 2007.
On Tuesday, Huntsman announced that its annual meeting had been delayed because of uncertainty surrounding the deal's closing. However, the company noted it was working towards holding the shareholder meeting on Nov. 19.
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