U.S. chemical company Huntsmansaid Friday the $6 billion buyout offer from Apollo Management's Hexion Specialty Chemicals is superior to the previously accepted deal offered by Basell.
Huntsman said it had notified Basell that it could change its earlier recommendation that shareholders approve the Basell deal, but said it "will take into account any changes to the financial terms" of Basell's bid, which could potentially result in a bidding war between the two suitors.
Dutch-based Basell, which is controlled by U.S. industrial group Access Industries, last month agreed to buy Huntsman for $5.6 billion, excluding debt, or $25.25 per share.
Hexion has submitted a bid of $27.25 a share. The bid includes an offer to fund $100 million of the $200 million break-up fee that Huntsman agreed to pay if it called off the Basell deal.
A spokesman for Basell said the company was not willing to comment on whether it would consider raising its bid for Huntsman.
However, shares of Huntsman traded above Hexion's rival offer, as some investors anticipated a sweetened bid from Basell.
"With the stock price trading above the bid, it certainly reflects some sentiment in the market that there could be a bidding war," said Jeffrey Bernardo, managing director of Augustine Asset Management, which owns a stake in Huntsman.
"I don't think it's unreasonable for a subsequent bid to come in say another 10% higher than the current Apollo number," said Bernardo BB&T Capital Markets analyst Frank Mitsch, in a note to investors on Thursday, said that he would not be surprised to see more feverish bidding for Huntsman from Access.
Access Industries, which is run by Russian-born American industrialist Len Blavatnik, recently lost out to Saudi Arabian chemical maker SABIC in a bid for GE Plastics.
STRATEGIC OVERLAP
Mitsch also contends that Hexion and Huntsman have more of a strategic overlap that could result in increased cost savings.
"While we don't consider Huntsman and Hexion to have a great deal of business synergies, we do believe Huntsman fits better to Hexion than to Basell," said Mitsch.
However, a deal between Hexion and Huntsman could face some regulatory hurdles, as the companies are both large players in the epoxy resins market. Epoxy resins are used in paints, adhesives and in aerospace applications.
In a note to investors, Lehman Brothers analyst Sergey Vasnetsov said Hexion would likely have to divest a significant portion of its epoxy business due to antitrust concerns for its bid for Huntsman to get past regulators.
Epoxy resins represent about 14% of Hexion's total sales and about 9% of Huntsman's sales, according to Vasnetsov.
"We believe the overlap of chemical products between HUN and Hexion is very large in epoxy resins, but is small elsewhere; hence we do not expect antitrust to be a major concern in the overall transaction," said Vasnetsov.