After a protracted battle, US chemicals companies Huntsman and Hexion have reached an agreement over the proposed buyout by Hexion of Huntsman.

This ‘agreement’ means that Hexion, owned by Apollo Management, has to stump up $1 billion to pay off Huntsman and the deal, which was meant to see Hexion pay $6.5 billion for Huntsman, is off.

Huntsman is glad of the cash, according to CEO Peter R. Huntsman (press release) and so they should be, because their shares dropped by either 40% (Times) or 51% (Forbes) depending which story you read. This means that the cash they’re getting from Hexion is more than the company’s current value. Nice work Huntsman!

The two companies had agreed a deal in 2007 where Hexion would merge with Huntsman to create a mega-chemicals outfit, paying $6.5 billion for the privilege. But things changed since the heady days of last summer when the deal was agreed. Huntsman’s debts rose with the cost of petroleum, leading Hexion to try and back out of the deal, Huntsman insisted they couldn’t do that and at the last minute the banks involved refused to finance the deal.

Since then both sides tried to sue each other as well as the banks financing the deal. This deal between Huntsman and Hexion doesn’t alter Huntsman’s action against Credit Suisse and Deutsche Bank. “We must continue to pursue our multi-billion dollar Texas case against Credit Suisse and Deutsche Bank for the harm they have caused,” says Jon Huntsman, founder and Executive Chairman of Huntsman.

Huntsman is based in The Woodlands, Texas and Hexion in Columbus, Ohio.