Battle of the billionaires — Huntsman suit against Hexion owner hits court

Jon Huntsman Sr., chairman of Huntsman Corp., doesn't mind playing tough. He once told a hedge-fund manager that it would be his "life's purpose" to make trouble for him if he didn't agree to a proposed restructuring. The manager acquiesced.

Now Huntsman, who is 71, is battling someone not known for backing down. On Monday, a showdown began in Delaware Court of Chancery between his chemical company — which is based in Salt Lake City and run from The Woodlands, Texas — and private-equity tycoon Leon Black's Apollo Management LP.

Apollo wants to scuttle a July 2007 agreement to buy Huntsman for $6.5 billion, claiming Huntsman's operations have badly deteriorated. Huntsman says the business is solid and the merger pact is ironclad.

The trial is opening a window into the messy aftermath of the private-equity buyout boom, which came to a screeching halt last year when the credit crunch hit. Many deals struck at the end of that era have come unglued. Investors with cold feet are walking away from agreements. Companies they were supposed to buy are crying foul.

The Delaware lawsuit pits Huntsman against one of the buyout industry's most hard-nosed deal makers. Jon Huntsman characterizes the deal's collapse as a poor reflection on the business practices of the buyout industry in general, and of Apollo in particular. He says he regrets trusting Apollo to honor its agreements.

"I will fight this until the day I die," he says, referring to Apollo's effort to kill the deal. "Private-equity firms have taken over America, and we will fight it. These guys are getting away with dishonest behavior, and I won't tolerate it."

Apollo executives, including Black, declined to comment on Huntsman's remarks. A spokesman for the firm declined to comment on the lawsuit.

Apollo's deal for Huntsman came as the buyout boom was entering its final throes. It was structured as a merger between Huntsman Corp. and Hexion Specialty Chemicals, an Apollo-owned company. The agreement called for Hexion to swallow a company twice its size, in a deal financed entirely with debt. Huntsman estimates his family would have collected $1.3 billion for its 23 percent stake in the company.

Walking away from deals was once considered taboo in the buyout business, but the credit crunch changed that. Over the past year, many prominent private-equity players, including Kohlberg Kravis Roberts & Co., Blackstone Group LP and Cerberus Capital Management LP have backed out of deals. Roughly 20 percent of leveraged buyouts of U.S. companies in 2007 have been terminated, according to FactSet MergerMetrics.