The proposed Huntsman-Hexion merger has spawned yet another lawsuit: Huntsman Corp. shareholder John Catechis filed a lawsuit Tuesday claiming that Huntsman and three of its top officers failed to disclose and misrepresented information that ultimately doomed the merger.
The lawsuit, filed in U.S. District Court in Salt Lake City, seeks class-action status for Huntsman Corp. shareholders between June 26, 2007, and June 18, 2008, and requests unspecified damages. The complaint names as defendants the corporation, President and CEO Peter Huntsman, Chief Financial Officer and Executive Vice President J. Kimo Esplin and Vice President and Controller L. Russell Healy.
The company, after getting a $25.25-per-share acquisition offer from Basell AF last summer, got a better offer from Hexion Specialty Chemicals Inc., a unit of Apollo Management LP. Hexion upped its offer to $28 per share, leading Huntsman Corp. to terminate the Basell agreement.
Those merger announcements caused Huntsman stock to rise, and with stock "trading at artificially inflated prices," Huntsman insiders subsequently sold more than 57 million shares of the company's stock for more than $1.3 billion, the lawsuit claims.
In June of this year, Hexion filed a lawsuit against Huntsman to terminate their agreement, and Catechis' suit says the Hexion lawsuit revealed underperforming Huntsman business segments. That, plus Huntsman's decreased earnings potential and an increase in net debt, left Hexion unable to secure documents needed to close the merger, sending Huntsman shares plummeting.
"If the merger is ultimately completed between Huntsman and Hexion, or between Huntsman and another merger partner, in light of the deterioration in the company's financial well-being, it will be completed at a vastly inferior price per share to that previously agreed upon by the parties at the time the Huntsman-Hexion merger agreement was announced," the Catechis lawsuit states.
Catechis claims that the defendants withheld or misrepresented information about the merger proposal, future debt estimates, future net earnings, business-segment performance, the company's equity value and other matters, leaving the company's statements about its financial well-being and business prospects, including the consummation of the merger with Hexion, "lacking in any reasonable basis when made."
Another Huntsman investor is seeking class-action status filed last month in federal court in New York in a case against Hexion. The investor, Sandra Lifschitz, claims Hexion deceived the investing public regarding its efforts and intentions in the Huntsman merger.
Huntsman Corp. sued Apollo and its partners in June for $3 billion, accusing them of fraud for trying to abandon the $6.54 billion Huntsman acquisition. A trial in that case is set to begin Sept. 8 in Delaware.
The stock price for Huntsman Corp., rose 2 cents Tuesday to close at $14.10. During the past year, the price has ranged from $9.76 to $27. The company is based in Salt Lake City and run from The Woodlands, Texas.
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