Banks Unwilling To Fund Huntsman-Hexion Deal

Banks are unwilling to fund Hexion Specialty Chemicals’s $6.5 billion acquisition of rival Huntsman Corp., delaying a closing of the deal that had been expected later today, Huntsman said on Tuesday.

The deal has been on the brink of collapse for months, after Hexion Specialty Chemicals and its parent Apollo Management filed suit against Huntsman in June, arguing that the combined company would be insolvent if the deal went ahead. Huntsman countersued.

However, a series of recent court rulings on the dispute have gone in Huntsman’s favor, undermining Apollo and Hexion Specialty Chemical’s arguments against the $28-a-share deal, which was struck at the height of the private equity boom in 2007.

A federal court in Texas recently backed Huntsman by preventing Credit Suisse and Deutsche Bank — the banks funding the deal — from filing any lawsuit alleging the combination of Hexion and Huntsman would be insolvent.

Last week, Huntsman said it had received a written opinion from valuation firm American Appraisal, which states that the company to be formed from the pending merger of Hexion Specialty Chemicals and Huntsman would be solvent.

But the banks do not believe the opinion meets the conditions of the commitment letter, Huntsman said in a statement.

Hexion Specialty Chemicals has informed Huntsman that it is working to resolve the banks’ concerns and is still seeking to close the merger.

(Reporting by Euan Rocha; Editing by Derek Caney)