As far as the European Commission is concerned, nothing stands in the way of the merger of US groups Hexion Specialty Chemicals (Columbus, Ohio / USA; www.hexion.com) and Huntsman (Salt Lake City / Utah; www.huntsman.com) – provided Hexion agrees to divest some of its epoxy resins facilities, primarily in Germany. In an odd twist, the Commission’s decision puts it a step ahead of the merger partners. They are actually standing in each other’s way, with lawyers and financial advisers calling the shots from the wings – see Plasteurope.com of 09.06.2008 and 26.06.2008.

The Commission’s main competition concern is that combining the two epoxy portfolios into a single entity would lead to a controlling stake in some markets, especially as the companies overlap at all three levels of the value chain. The German sale would involve production and R&D operations of Bakelite at Duisburg and its subsidiary MGS Kunstharzprodukte (Stuttgart; www.mgs-online.com). In the US, Hexion has volunteered to sell epoxy facilities, including tangible and intangible assets, at Argo, Illinois, and Norco, Louisiana.

Meanwhile, Hexion and its private equity owner Apollo Management (New York / USA) are still seeking to back away from the Huntsman deal. Since the withdrawal plan was revealed in mid June, the two sides have been exchanging open letters outlining their respective positions. Huntsman CEO Peter Huntsman used the EU’s thumbs up to ask Hexion to “fully comply with” its conditions and also to move towards obtaining the approval of the US Federal Trade Commission (FTC). Huntsman also intends to exercise its right to extend the merger agreement until 2 October 2008, a move Hexion opposes.

According to reports, two banks that initially planned to back the USD 10.6 bn deal, Deutsche Bank and Credit Suisse, are now taking a narrower view of the M&A market compared to a year ago and have rejected a Hexion/Apollo request for additional funding. Amid all the accusations and counter accusations, this appears to be the crux of the matter. Another irony of fate, US observers say, is that Jon Huntsman, founder and board chairman of the family-owned chemical producer, prides himself on always sticking to decisions once struck, even if under no legal obligation to do so.