Apollo raises Huntsman bid

0 Comments | Deseret News (Salt Lake City), Jul 10, 2007 | by David Koenig Associated Press

DALLAS -- Apollo Management LP raised its takeover bid for rival chemical company Huntsman Corp. to about $6.5 billion on Monday, sweetening an offer that was already higher than a competitor's proposal.

Apollo raised the bid by its Hexion Specialty Chemicals Inc. unit by 2.7 percent even though the Huntsman board had judged its earlier offer superior to one that Salt Lake-based Huntsman had already accepted from the Dutch company Basell.

It wasn't clear whether Apollo raised its bid to impress the Huntsman board -- which was still recommending shareholders accept a sale to Basell -- or if it was trying to pre-empt a counteroffer from Basell.

A spokesman for Apollo declined to comment. A spokesman for Basell wouldn't say whether the Dutch firm had been preparing a new offer -- or would respond to the latest move by Apollo. Basell has until the close of business today to get back in the bidding.

"We are considering our options, and we'll decide over the next few days what our plan is," said the Basell spokesman, Stan Neve.

The bidding for Huntsman is among the latest in a wave of deals in the chemicals industry, as companies try to bulk up.

Also on Monday, London-based private equity firm CVC Capital Partners bid $2 billion for Dutch chemicals distributor Univar NV. The offer, a 37 percent premium over Univar's closing stock price on Friday, was supported by the Univar board.

In March, Univar agreed to pay $600 million for privately held Chemcentral Corp. of Bedford Park, Ill., to bolster U.S. sales. About two-thirds of Univar's business is in the United States, with the rest in Europe. The company had sales of $6.6 billion last year.

Basell, a Dutch holding company controlled by U.S. industrialist Len Blavatnik's Access Industries Inc., had the early inside track on bidding for Huntsman.

Basell offered $25.25 per share. But Apollo topped that by offering $27.25 per share.

On Monday, Apollo's Hexion raised its offer to $28 per share, or more than $6.5 billion after factoring in about 233 million diluted shares of Huntsman, said an Apollo spokesman, Jonathan Gasthalter. Apollo would also assume about $4 billion in Huntsman debt.

Hexion said Friday that Huntsman had determined that its bid was superior to the Basell offer. Hexion said Huntsman told Basell it would continue to recommend the Dutch firm's bid to shareholders for three business days, or the close of business on Tuesday, after which it could oppose the deal -- essentially inviting Basell to sweeten its offer.

"The board through its advisers continues to be in contact with both Hexion and Basell," Huntsman spokesman Russ Stolle said Monday. "The board will continue to exercise its fiduciary duties to shareholders."

Huntsman is based in Salt Lake City but operates from the Houston area.

Fortune magazine lists Huntsman's annual revenue at $13.1 billion. Hexion is listed as the 16th-largest chemical company with revenue of $5.2 billion.

Chemical companies have been dealing with high costs for their primary raw materials, petroleum products. Larger size could help the companies negotiate better terms with suppliers.

Chemical companies also look more attractive to investors because they have benefited from growing demand for plastic used in everything from soda bottles to automobiles. The strong plastics market has given them strength to raise prices enough to cover higher raw material costs.

Blavatnik, the financier behind Basell, drew attention in May when he announced plans to buy an 8.3 percent stake in Houston- based Lyondell Chemical Co. by picking up shares being sold by Occidental Petroleum Corp. Lyondell is one of the largest U.S. chemical companies. It makes building blocks for plastics and gasoline additives.

Neve, the Basell spokesman, said Blavatnik's options to buy the Lyondell stock expire next year and he has not exercised them yet. Neve said Blavatnik has a long-term strategic interest in the chemicals industry and favored Lyondell as one of the sector's global leaders.

Huntsman Corp.'s roots date back to 1970, when Jon Huntsman Sr. left Dow Chemical Co. to start the Huntsman Container Corp., which pioneered the clamshell container for the Big Mac.

He has said that the Basell deal would yield nearly $1.5 billion cash for his family. He also said he recently had transferred $600 million worth of stock to the Huntsman Foundation, a major benefactor of the family's Huntsman Cancer Institute and Hospital on the campus of the University of Utah.

Peter Huntsman, president and chief executive officer of Huntsman Corp., has said that under the Access offer, the roughly 50 employees at the world headquarters in the Salt Lake office, as well as the 1,000 employees in the Houston area, will be unaffected by the acquisition at least for the next year.

Contributing: Bloomberg News