A New Twist in the Huntsman Hunt

Buyout firm Apollo Management makes a surprise bid for the chemicals company, topping a previous offer from billionaire Leonard Blavatnik

Many were surprised July 4 when a bidding war broke out over chemical firm Huntsman Corp.

With its founding family ready to cash out, Huntsman agreed to be acquired last week for $9.6 billion by the privately held Basell Polyolefins. Owned by billionaire Leonard Blavatnik's Access Industries , Basell was offering $25.25 per Huntsman share.

On July 5, however, Hexion Specialty Chemicals Hexion Specialty Chemicals presented a counter-offer of $27.25 per share for Huntsman. The offer was a surprise to many who believed Huntsman had already held a private auction. Hexion is also privately owned, by Apollo Management.

Huntsman shares surged 12.5% on July 5, closing at $27.46. But shares could go higher if Basell, or another firm, matches or exceeds the Hexion bid. Standard & Poor's analyst Richard O'Reilly raised his 12-month target price to $28 per share. BB&T Capital Markets analyst Frank Mitsch also expects a bidding war, setting his target price at $29 per share.

Both analysts said Huntsman appeared to be a better match with Hexion, with which it has several overlapping chemical businesses. Huntsman and Basell, though both chemical outfits, "have very limited business and technology overlaps, in our opinion," Mitsch wrote.

O'Reilly said regulators might scrutinize a Hexion-Huntsman deal over concerns it could unfairly stifle competition. "While antitrust issues may be greater with Hexion, we do not see them as challenging," O'Reilly wrote July 5. (S&P, like BusinessWeek, is a unit of the McGraw-Hill Companies; BB&T Capital Markets seeks to do investment banking business with Huntsman.)

It's hard to tell what either merged firm would look like, O'Reilly said in an interview. That's because both potential buyers of Huntsman are private companies, with limited public information available about their strategies and lines of business.

Huntsman issued a statement saying a committee of its board was studying the Hexion bid. The Huntsman family, which includes the current governor of Utah, owns more than half the firm's shares.

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