Huntsman (HUN)

Hexion, owned by private equity firm Apollo, bid $28 for HUN last year, but recently tried to back out of the $6.5 billion acquisition, claiming that the combined company would be insolvent. Huntsman’s stock got hammered on the news. But Huntsman is fighting back, suing Apollo in Texas state court for $3 Billion, where it accused the buyout firm of fraud and duplicity.

• Huntsman has a good case here, especially in front of a Texas jury. Apollo made a deal and is trying to weasel out of it.
• A lot of the recent selling was due to selling by merger arb hedge funds or mutual funds that sold for "window dressing" purposes to remove HUN from their second quarter portfolios.
• Insider Buying: HUN management recently made large purchases at above $20/share.
• Apollo and HUN may reach a compromise at a lower price, say 25.
• Another buyer may emerge.
• At this price level, HUN seems like a good value as a standalone company.

Huntsman is poised to profit off of the Department of Defense's recently increased Air Barrier standards. These new standards are intended to make U.S. Gov't and Department of Defense buildings more air tight, and thus more energy efficient. Spray Polyurethane Foam is a one of a handfull of technologies available to meet the new building standards, and should increase in demand once the Government begins building new construction or renovating their 3B sq ft worth of building space.