NEW YORK (Reuters) – Four large hedge funds, all shareholders of Huntsman Corp (HUN.N: Quote, Profile, Research, Stock Buzz), have proposed a plan to salvage a $6.5 billion buyout of the chemical company by a unit of Apollo Global Management.
But Apollo’s Hexion Specialty Chemicals unit late Thursday rejected the plan, saying Huntsman’s increased debt and decreased earnings since the deal was struck in July 2007 would no longer make a combined company solvent.
“We are not seeking to renegotiate this transaction,” Hexion responded in a statement. “We are seeking to terminate it, and obtain judicial confirmation that Hexion has no obligation to pursue the acquisition or to pay Huntsman a termination fee.”
Apollo’s Hexion has been locked in a legal battle to try to get out of the $28-per-share deal, reached last year at the height of the leveraged-buyout boom. Since then, the credit markets have seized up, making the math behind the deals no longer attractive. In June, Hexion filed suit against Huntsman seeking to limit its liability in the event that the deal falls apart.
Huntsman countered with its own suit against Apollo and is seeking more than $3 billion in damages, arguing Apollo and its partners had induced Huntsman to end a merger deal with Dutch company Basell AF BASL.UL in order to forge a merger with Apollo affiliate Hexion.
Huntsman shares closed at $13.10 on Thursday on the New York Stock Exchange.
Earlier Thursday, hedge funds Citadel Investment Group, D.E. Shaw & Co, MatlinPatterson Global Advisers LLC and Pentwater Growth Fund Ltd offered a plan to finance at least $500 million of the merger amount, according to a letter sent to Apollo and its Hexion Specialty Chemicals unit.
“We are making this proposal solely on our behalf as institutional investors, and not on behalf of Huntsman, the Huntsman family or any other Huntsman stockholders,” the letter said.
The letter was contained in a U.S. Securities and Exchange Commission filing.
“The result will be less debt service costs and a higher rate of return on equity,” the letter said.
In exchange for the financing, the funders would expect to share in profits above a 20 percent cumulative annual rate of return.
The hedge funds said they would commit slightly more than $245 million and expect other large stockholders would contribute about $68.7 million. Huntsman CEO Peter Huntsman expects Huntsman Family Stockholders would commit $186.2 million, the letter said.
By Ilaina Jonas
(Editing by Phil Berlowitz)