Huntsman Corp. on Monday fired a salvo in a legal battle to reinstate a deal that would sell the company for $6.54 billion.
The company sued Apollo Management LP and partners Leon Black and Joshua Harris in Conroe, Texas, accusing them of fraud and interference. The lawsuit claims they induced Huntsman to terminate its merger agreement with a Dutch company last July in order to enter into a merger agreement with Apollo subsidiary Hexion Specialty Chemicals.
Huntsman's lawsuit seeks actual damages exceeding $3 billion, plus exemplary damages.
In July 2007, Apollo Management LP, through its Hexion Specialty Chemicals unit, offered $28 per share to acquire Huntsman, which previously had accepted a $25.25 per share offer from the Dutch manufacturer Basell AF. After Basell failed to meet the new offer, Huntsman's board approved the Apollo deal.
Hexion filed a complaint last week in Delaware Court stating that the deal was no longer viable because Huntsman's debt had increased, and profits would no longer meet previous projections. The following day, Huntsman stock fell 38 percent.
Under the terms of the acquisition agreement, Hexion would pay $6.54 billion in cash and assume $4 billion in debt, as well as $100 million toward a $200 million fee that Huntsman paid Access Industries Holdings LLC to end their merger agreement.
After accepting Hexion's offer last year, president and chief executive officer Peter Huntsman and company founder and chairman Jon Huntsman Sr. purchased thousands of shares of additional stock.
"That tells you something about our confidence that this deal would be done," Peter Huntsman said Monday. "We'll be in the same position as our shareholders."
Huntsman Corp. shares slipped 4 cents to close at $12.80 on Monday, down from about $21 before Hexion's announcement June 18. Huntsman is based in Salt Lake City and run from The Woodlands, Texas.
"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," Peter Huntsman said. "We intend to pursue every available legal action required to hold Apollo, Black and Harris responsible for their ruinous actions."
Similar sentiments were expressed by Jon Huntsman Sr., who said in a statement that he also was "outraged." "We will do everything in our power to hold Apollo and its founders accountable for the multi-billion dollar harm their actions have caused our company," he said.
Hexion released a prepared statement Monday saying it plans to fight the Huntsman lawsuit. Hexion also contended that Huntsman Corp. had violated a provision of the merger agreement by filing the lawsuit in Texas, because the merger agreement requires that any litigation be brought exclusively in Delaware.
"It is unfortunate that Huntsman has chosen to file a baseless lawsuit against Apollo and to personally sue two of its principals," the release said. "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."
Peter Huntsman said Hexion's lawsuit to dissolve the merger deal came as a "complete surprise." "We had been working cooperatively for the last year to get this transaction complete," he said.
He said he believed that, in looking back at the actions of Apollo since the July 2007 agreement, the original agreement "was a ploy on their part to eliminate any competition and buy our company and have some sort of price renegotiation."
He added that following Huntsman Corp.'s acceptance of the merger offer, executives from Apollo came to Salt Lake and even dined at the home of Jon Huntsman Sr.
"We took these guys at their word," Peter Huntsman said.
Despite the harsh words and legal wrangling, Huntsman said he would drop the lawsuit if Apollo would dismiss its lawsuit and honor the initial agreement."They could solve this whole thing tomorrow," he said. "Our shareholders are entitled to $28 a share, and we're going to see that they get it."
Contributing: Associated Press. E-mail: [email protected]
E-mail: [email protected]