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COLUMBUS, Ohio (AP) -- Hexion Specialty Chemicals Inc. says it no longer thinks that will be able to acquire fellow chemicals maker Huntsman Corp. because of the deterioration of Huntsman's finances.
Columbus, Ohio-based Hexion, which is controlled by an affiliate of Apollo Management LP, filed a lawsuit in the Delaware Court of Chancery to declare its contractual rights with respect to the $10.6 billion deal for the company, which is based in Salt Lake City but has its administrative headquarters in The Woodlands, Texas.
Hexion says it believes that the capital structure agreed to for the combined company is no longer viable because of Huntsman's higher debt and its lower-than-expected profits.
Hexion says going forward with the acquisition with that capital structure would render the combined company insolvent.
Huntsman's first-quarter profit tumbled 84 percent on higher revenues. Earnings were $7.3 million, down from $46.6 million in the first quarter of 2007.
In late May, the company announced big price hikes and an energy surcharge to cover rising costs. Huntsman sells epoxy resins, polyurethanes and other specialty chemicals.
Huntsman executives didn't return calls Wednesday from The Associated Press. In early May, Chief Executive Peter R. Huntsman attributed the company's declining profits to higher costs for raw materials and the dollar's decline.
Hexion, which is controlled by an affiliate of Apollo Management LP, planned to buy Huntsman for $6.5 billion in cash.
(Copyright 2008 by The Associated Press. All Rights Reserved.)
