Huntsman, Hexion Merger Devolves Into Legal Battle
Hexion Specialty Chemicals Inc. (Columbus, Ohio) and Huntsman Corp. (The Woodlands, Texas) have filed suit against each other in a legal battle that erupted following the failure of a proposed merger of the two chemical giants. The merger was first proposed during summer 2007 and followed an earlier bid by Basell
Hexion Specialty Chemicals Inc. (Columbus, Ohio) and Huntsman Corp. (The Woodlands, Texas) have filed suit against each other in a legal battle that erupted following the failure of a proposed merger of the two chemical giants.
The merger was first proposed during summer 2007 and followed an earlier bid by Basell (Hoofddorp, The Netherlands) to acquire Huntsman. Huntsman terminated the merger with Basell in favor of the more attractive Hexion bid, valued at about $10.6 billion (USD). The once nearly certain marriage between the two competitors is now mired in legal actions.
Hexion announced in late June that it has filed suit in the Delaware Court of Chancery, saying 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 agreed-to capital structure would render the combined company insolvent.
This court action was followed on June 23 by news that Huntsman has filed suit in Conroe, Texas, against Hexion parent Apollo (New York, N.Y.) and Apollo partners Leon Black and Joshua Harris for "fraud and tortious interference." Huntsman claims that Apollo, Black and Harris induced Huntsman to terminate its merger agreement with Basell to enter into a merger agreement with Apollo affiliate Hexion instead. In the petition, Huntsman seeks a jury trial to determine the defendants' liability to Huntsman for actual damages, which the latter claims have exceeded $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 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 its own 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."