Gas-explosions link to termination of Kraton-LCY deal

ERJ staff report (PR)

Houston, Texas - Kraton Performance Polymers Inc.'s.board has withdrawn its support for a previously announced agreement for Kraton to combine with LCY's styrenic block copolymer (SBC) operations.

The board had notified Taiwan-based LCY on June 30 of the intended withdrawal of a recommendation for Kraton shareholders to approve the deal, unless both parties could agree on revised terms.

This move was linked to a decline in operating results for LCY's SBC business in the first quarter of 2014 and in its business outlook, as well as a related decline in Kraton's own share price. (See ERJ report)

Following a number of talks to renegotiate terms, Kraton said that LCY notified it on 4 Aug that it would not agree to any revisions to the terms and conditions of the combination agreement.

Under the terms of the deal, Kraton is to pay LCY a $25 million break-up fee upon withdrawal of board recommendation for the deal. However, this is unless an 'LCY material adverse effect' has occurred and is continuing at the time of the withdrawal.

Kraton‘s board said it believes that the impact upon LCY of the 31 July explosion in a gas pipeline in Kaohsiung, Taiwan (see ERJ report) constitutes such an 'effect' as defined in the combination agreement.