CHEMICAL company Huntsman Corporation has agreed to merge with a US company, rejecting its initial acceptance of an offer from Dutch rival Basell.

Huntsman, which employs about 650 people on Teesside, has announced it has terminated its merger agreement with Basell and was now preparing to link up with Hexion Speciality Chemicals, in a $10.6bn deal.

Last month, the board of US-owned Huntsman agreed to a $9.6bn deal with Basell.

But the company now says the Hexion bid is "deemed to be a superior proposal to the Basell agreement" and the board has unanimously backed the bid from Hexion, which is owned by US private equity group Apollo.

None of the jobs at Huntsman's Teesside sites - the pigments division at Greatham, and polyurethanes operation at Wilton will be affected.

Basell is to be given $200m compensation by Huntsman for the breach of the agreement, half of which will be funded by Hexion.

Jon Huntsman, founder and chairman of the company, said: "I have invested much of my life in Huntsman Corporation.

"However, the time has come when it is in the best interests of our shareholders to sell the company.

"I am pleased with the outcome of our merger negotiations with Apollo, and have every confidence that the combined Hexion and Huntsman teams will be superb stewards of this business for the next era."