Huntsman settles for $1 billion over failed merger but continues action against investment banks

Family-owned chemical company Huntsman has terminated its merger agreement with Hexion and settled out of court for $1 billion. However, it is continuing its multi-billion dollar lawsuit against Credit Suisse and Deutsche Bank.

Huntsman has launched several lawsuits – amounting to $3 billion – against Hexion and its private equity owners Apollo following the latter's announcement in June that it would be pulling out of the merger because the new company would be insolvent.

The family business says the settlement includes a cash payment of $425 million plus $250 million in exchange for 10 year convertible notes. These amounts will be paid by "certain affiliates" of Apollo according to a statement.

In addition, Huntsman expects the merger's $325 million break-up fee to be paid by Hexion but funded by Credit Suisse and Deutsche Bank.

At least $500 million is to be paid to Huntsman by 31 December 2008, with any remaining payments made by 31 March 2009.

"We are pleased to have reached this agreement with Hexion and Apollo.  Receipt of these proceeds will enhance the strength of Huntsman's balance sheet and better position our company to prosper during the current turbulence in the global economy," said Huntsman's president and CEO Peter R Huntsman.

However, Huntsman's lawsuit against Credit Suisse and Deutsche Bank, which includes claims that the banks conspired with Apollo and tortiously interfered with Huntsman's merger agreements with Hexion and, previously, Basell, still stand.

The trial is set to begin in May next year and Apollo and its principals have agreed to fully cooperate with Huntsman's litigation against the banks.

"This is a significant settlement for our company and its shareholders, but we must continue to pursue our multi-billion dollar case against Credit Suisse and Deutsche Bank for the harm they have caused," said Jon M Huntsman, founder and executive chairman of Huntsman.

Click here to read our previous coverage of the Huntsman/Hexion saga