Huntsman Corp. wants $3 billion for failed Hexion buyout
A Delaware judge is slated to begin hearing arguments Sept. 8 on whether Apollo subsidiary Hexion Specialty Chemicals Inc. can cancel its $6.5 billion buyout. The unit wants to back out because Huntsman's debt had allegedly increased and its profit wouldn't meet forecasts. Huntsman wants the unit of Apollo, a buyout firm run by ex-Drexel Burnham Lambert banker Leon Black, to complete the deal or cover investors' losses.
"Huntsman is confident it will prevail in the trial in Delaware, which will pave the way to closing the merger at $28 per share," Russ Stolle, a Huntsman spokesman, said in an interview. If Apollo and Hexion renege, "Huntsman will seek damages that Huntsman currently estimates to be in excess of $3 billion."
Hexion sued Huntsman June 18 in Delaware Chancery Court in Wilmington, arguing the combined company would be insolvent and that its lenders were leery of financing the deal. Salt Lake City-based Huntsman responded by suing New York-based Apollo and partners Black and Joshua Harris in Texas state court for $3 billion, accusing them of wrongfully interfering with another bid for the chemical maker.
The combined company would be one of the world's largest specialty-chemical makers, with annual sales exceeding $14 billion, 21,000 employees and 180 facilities, according to Apollo. Columbus, Ohio-based Hexion is the top producer of adhesives used in plywood. Huntsman is the world's biggest maker of epoxy adhesives.
Delaware Chancery Judge Stephen Lamb has given both companies six days to present witnesses. Lamb will hear the case without a jury. Damages would be considered in a second phase of the case.
"We look forward to presenting our case," Jonathan Gasthalter, a Hexion spokesman, said in an e-mailed statement.
The proposed buyout includes $4 billion of assumed debt and $100 million to help defray a $200 million fee that Huntsman paid Access Industries Holdings LLC to end their merger agreement. New York-based Access offered to buy Huntsman for $25.25 a share before Hexion outbid it.
The merger agreement also calls for Hexion to pay a $325 million breakup fee if the buyout doesn't go through, according to court papers.
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