Hexion, which is owned by Apollo Management LP, claims that Huntsman's
dismal first quarter results -- the fallout from higher raw materials and
energy costs -- mean the merged company would be insolvent as soon as it
was formed. Moody's Investors Service agreed Thursday the merged
company would likely violate its debt covenants at inception.
But,
as Moody's noted, the target is raising some prices by up to 25% and is
adding energy surcharges to some. Moody's said that, if the company can
make those prices stick, it could make the merger more viable.
Don't
say that too loudly around the regulators at the Federal Trade
Commission and the European Commission, however. After all, if the
companies can boost prices that much, it might suggest that the
companies have strong pricing power. In other words, if the deal is
doable economically, it may be worrisome from a competition standpoint.
Huntsman will no doubt point out that Dow Chemical Co. said this
week that it would raise prices across the board by up to 20%. -
John E.
Morris and Scott Stuart
