Huntsman Corporation Form 8-K Summary
Business Context and Reporting Period
This Current Report (Form 8-K) was filed on July 13, 2007, regarding events occurring on July 12, 2007. Huntsman Corporation (the "Company") announced the entry into a definitive merger agreement with Hexion Specialty Chemicals, Inc. ("Hexion"). Concurrently, the Company terminated a prior merger agreement with Basell AF ("Basell").
Key Financial Metrics and Transaction Terms
- Merger Consideration: $28.00 per share in cash for all outstanding common stock.
- Termination Fee (Basell): $200 million paid to Basell upon termination of the prior agreement.
- Funding of Termination Fee: Hexion funded $100 million of the $200 million fee paid to Basell.
- Contingent Termination Fee (Hexion): $225 million payable to Hexion under specified circumstances if the agreement is terminated, plus reimbursement of the $100 million Hexion-funded Basell fee.
- Price Escalation: If the transaction is not consummated by April 5, 2008, the cash price per share increases at 8% per annum.
- Stockholder Support: Voting agreements secured with stockholders controlling 57% of the common stock (including MatlinPatterson, the Huntsman family, and Fidelity Charitable Gift Fund).
Material Changes Versus Prior Period
The most significant change is the shift in strategic direction from a proposed merger with Basell to a merger with Hexion. The Basell agreement, dated June 26, 2007, offered $25.25 per share and has been terminated. The new Hexion agreement offers a higher price of $28.00 per share. The Company has incurred a $200 million cash outflow to satisfy the termination obligation to Basell.
Guidance, Outlook, and Risks
Conditions to Closing: The merger is not subject to a financing condition but requires Huntsman stockholder approval, expiration of Hart-Scott-Rodino waiting periods, foreign competition approvals, and other customary conditions.
Timeline: Hexion has up to 12 months to close the transaction, subject to a potential 90-day extension by the Huntsman Board.
Risks and Contingencies:
- The transaction may be terminated if the Board changes its recommendation due to a "Superior Proposal."
- Regulatory approvals are required; failure to obtain them could delay or prevent closing.
- Significant cash outflows are required for termination fees if the deal fails under specific scenarios.
Management Commentary: The Board of Directors unanimously approved the agreement on the recommendation of a transaction committee comprised entirely of independent directors. The Company advises investors to read the upcoming proxy statement for detailed information.
Key Facts for Investor Verification
- Verify the final approval status of the merger by Huntsman stockholders.
- Monitor regulatory filings for antitrust approvals under the Hart-Scott-Rodino Act and foreign jurisdictions.
- Confirm the status of the $200 million termination fee payment to Basell and the $100 million funding by Hexion.
- Review the upcoming proxy statement for details on director interests and potential conflicts.
- Track the 12-month closing deadline and the potential 8% annual price escalation clause.