Proposed Business Combination

6 Months Ended

Jun. 30, 2014

Proposed Business Combination

15. Proposed Business Combination

On January 28, 2014, we executed a definitive agreement to combine with the styrenic block copolymer (“SBC”) operations of Taiwan-based LCY Chemical Corp. (“LCY”). The combination agreement calls for LCY to contribute its SBC business in exchange for newly issued shares in the combined company, such that Kraton’s stockholders and LCY would each own 50% of the outstanding shares of the combined enterprise.  

On June 24, 2014, we provided an update of the first quarter 2014 results for LCY’s SBC business, which were lower than forecasted, and we provided revised financial projections for LCY’s SBC business. As a result of these financial results, the related decline in Kraton’s stock price and negative reactions from our stockholders, on June 30, 2014, we notified LCY that our Board of Directors intends to withdraw its recommendation that Kraton stockholders approve the previously announced combination agreement. Before the Kraton Board changes its recommendation Kraton was required by the combination agreement to provide LCY with at least five business days' written notice of the intention to withdraw or change its recommendation.

Our announcement of the notice to LCY stated that LCY and Kraton may engage in negotiations to determine whether they can mutually agree to changes in the terms of the combination agreement as would enable the Kraton Board to continue to recommend the transaction to Kraton stockholders. Kraton cannot predict whether any such negotiations will result in mutually agreeable changes to the combination agreement. Kraton does not intend to make further public comment regarding the status of any such negotiations unless and until the parties enter into an amendment to the combination agreement effecting such changes, or unless and until Kraton determines that any such negotiations have been abandoned. In either such event, such process may take longer than the minimum five business days provided in the combination agreement. The combination agreement will remain in effect unless and until it is terminated in accordance with its terms.