Huntsman, Hexion enter legal battle following termination of merger

Hexion Specialty Chemicals Inc. (Columbus, Ohio) announced on June 18 that it and related entities have filed suit in the Delaware Court of Chancery to declare its contractual rights with respect to its $10.6 billion merger agreement with Huntsman Corp. (The Woodlands, Texas). The merger was first proposed during s

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Hexion Specialty Chemicals Inc. (Columbus, Ohio) announced on June 18 that it and related entities have filed suit in the Delaware Court of Chancery to declare its contractual rights with respect to its $10.6 billion merger agreement with Huntsman Corp. (The Woodlands, Texas). The merger was first proposed during summer 2007 and followed an earlier bid by Basell to acquire Huntsman, which Huntsman terminated in favor of the more attractive Hexion bid. Hexion said in the suit that it believes that the capital structure agreed to by Huntsman and Hexion for the combined company is no longer viable because of Huntsman’s increased net debt and its lower than expected earnings. While both companies individually are solvent, Hexion believes that consummating the merger on the basis of the capital structure agreed to with Huntsman would render the combined company insolvent.

 

This was followed on June 23 by news that Huntsman has filed suit against Hexion parent Apollo (New York, N.Y.) and partners Leon Black and Joshua Harris in Conroe, Texas, for fraud and tortious interference in connection with inducing Huntsman to terminate its merger agreement with Basell to enter into a merger agreement with Apollo affiliate Hexion Specialty Chemicals instead. In the petition, Huntsman seeks a jury trial to determine the defendants’ liability to Huntsman for actual damages exceeding $3 billion, plus exemplary damages.

 

Commenting on the decision to file suit against Apollo, Black and Harris, Peter Huntsman, president and CEO, stated, “It is now clear that, to get Huntsman to terminate its contract with Basell, Apollo falsely represented to Huntsman its commitment to closing a merger with Hexion at $28 per share, when it really intended all along to then delay the process and create enough problems with the transaction to bring us back to the table at a lower price. We intend to pursue every available legal action required to hold Apollo, Black and Harris responsible for their ruinous actions.”

 

Apollo, following Huntsman’s filing, issued the following statement on June 23: “It is unfortunate that Huntsman has chosen to file a baseless lawsuit against Apollo and to personally sue two of its principals. Huntsman’s Texas suit violates a clear provision of the merger agreement which requires that any litigation be brought exclusively in the State of Delaware. As we alleged in our suit, primarily due to Huntsman’s underperformance, we believe that consummating the merger on the basis of the capital structure agreed to with Huntsman would render the combined company insolvent. In fact, Huntsman’s suit does not dispute that the combined company would be insolvent. We believe Huntsman’s lawsuit is wholly without merit.”