LCY terminates US$2 bn merger; Kraton disagrees on US$25 mn break-up fee

In the continuing saga of SBC maker Kraton Performance Polymers’s deal with Taiwanese petrochemical firm LCY Chemical, the US firm said it received notification from LCY that it has exercised its right to terminate the agreement, effective 8 August. This comes against the back of withdrawal of Kraton’s Board that its stockholders approve the agreement.

Kraton's June 30, 2014 notice cited the decline in operating results for LCY's SBC business in the first quarter of 2014 and a related decline in forecasted results thereafter, together with the decline in Kraton's stock price and negative reactions from stockholders following Kraton's June 24 disclosure.

Although the parties engaged in numerous discussions regarding possible revisions to the terms of the agreement, LCY notified Kraton that it would no longer negotiate, and would not agree to, any revisions to the terms and conditions of the agreement. The provisions of the combination agreement provide for Kraton to pay LCY a US$25 million break-up fee.

However, the Kraton Board believes that the impact upon LCY of the July 31, 2014 explosion in a gas pipeline in Kaohsiung, Taiwan (, constitutes an LCY material adverse effect as defined in the combination agreement and Kraton has notified LCY that accordingly it is not obligated to pay the termination fee.


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