Huntsman Corp. fell the most ever in New York trading Thursday after buyout firm Apollo Management LP and its Hexion Specialty Chemicals Inc. unit sued to back out of an agreement to acquire the chemical maker for $6.54 billion.

Huntsman founder and chairman Jon Huntsman Sr. on Thursday blasted Apollo for trying to withdraw from the deal and vowed to "fight Apollo vigorously on all fronts."

"Our business has been considerably damaged during the nearly yearlong period that Apollo should have used to get this transaction closed," he said in an e-mailed statement. "Apollo's recent action in filing this suit represents one of the most unethical contract breaches I have observed in 50 years of business."

Apollo, run by former Drexel Burnham Lambert banker Leon Black, planned to make the purchase through Hexion, a chemical company it formed through a series of acquisitions. New York-based Apollo and Hexion said in the lawsuit that lenders Credit Suisse Group and Deutsche Bank AG may not finance the deal because the combined company would be insolvent.

Black and founding partner Josh Harris "should be disgraced," Jon Huntsman said.

Hexion, which agreed last July to pay $28 a share for Huntsman, said in the complaint filed Wednesday in Delaware Chancery Court that the deal was no longer viable because Huntsman's debt had increased and profits wouldn't meet previous forecasts. Huntsman dropped $8, or 38 percent, to close Thursday at $12.86, the biggest drop since the company went public three years ago. Huntsman is based in Salt Lake City and run from The Woodlands, Texas.

The leveraged buyout is one of the biggest uncompleted transactions announced prior to last year's credit-market collapse, which led to a doubling of borrowing costs and a slowing of the U.S. economy. Takeovers of companies including SLM Corp. and Alliance Data Systems Inc. died after buyers backed out or couldn't arrange financing.

"We have always maintained that the Huntsman deal, struck at the peak of the buyout boom, did not make economic sense for the buyer," Hassan Ahmed, a New York-based analyst at HSBC Holdings Plc said Thursday in a report. "The financials of the deal started to look even less appealing over the last few quarters, as raw-material prices have escalated."

Apollo spokesman Steven S. Anreder referred calls for comment Thursday to Hexion spokeswoman Anna Cordasco, who wasn't immediately available.

In addition to the cash, the transaction includes $4 billion of assumed debt and $100 million toward a $200 million fee that Huntsman paid Access Industries Holdings LLC to end their merger agreement. Access, based in New York, had offered to buy Huntsman for $25.25 a share before Hexion bid $27.25 and then $28.