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.

In some cases, buyouts firms have blamed faltering finances of target companies; in others, they accuse banks of reneging on their financing commitments. Some jilted companies say the explanation is simpler — buyers' remorse.

The battle between Apollo and Huntsman comes at a sensitive time for Apollo, which is preparing to take itself public and has struggled with several of its large investments. Huntsman Corp. also has sued Apollo in a Texas state court, alleging that Apollo fraudulently interfered with Huntsman's efforts to finalize a deal with another potential buyer.

Huntsman, who served in the Nixon administration, says he occasionally goes fly-fishing with Vice President Dick Cheney. He recently urged a group of senators, including his friend Orrin Hatch, the Utah Republican who is a member of the Senate Finance Committee, to introduce legislation aimed at changing certain rules relating to how the profits of private-equity firms and hedge funds are taxed. (The Senate has yet to consider the matter.)

Huntsman says that after the deal was struck, he donated stock then valued at $700 million to a charitable foundation he set up. Several hundred million dollars of that money, he says, is slated for the Huntsman Cancer Institute, a research and treatment facility in Salt Lake City. Huntsman says he is a survivor of mouth, nose and prostate cancer.

Black, 57, grew up in Manhattan, the son of a prominent executive. Friends say the suicide of his father when Black was in college contributed to his determination to succeed on Wall Street. He helped develop the junk-bond market with Michael Milken at Drexel Burnham Lambert.

When that firm collapsed in the late 1980s, he started an investment firm to buy troubled companies and distressed securities. Apollo now has $40 billion in assets under management and dozens of portfolio companies, and Black's estimated net worth is about $4 billion.

In the trial, Apollo must prove that Huntsman's deteriorating finances constitute a material adverse effect — that is, that there has been a substantial downturn unrelated to overall economic or industry weakness. This would allow it to walk away from the deal without paying a $325 million breakup fee to Huntsman.

On Tuesday, during the second day of testimony, an expert witness for Hexion testified at the trial that Huntsman Corp.'s financial performance has deteriorated significantly since it agreed in July 2007 to be bought by Hexion. Telly Zachariades of New York-based Valence Group, a merger-advisory firm, also told Delaware Chancery Court Judge Stephen Lamb in Wilmington that Huntsman's predictions of future business success were "unreasonable and unreliable."

A ruling in Huntsman's favor won't necessarily result in a deal, and could be the beginning of a protracted legal fight. It's unclear whether the banks, Credit Suisse Group and Deutsche Bank AG, would fund the deal or try to back out of it themselves. The two banks declined to comment.


Contributing: Bloomberg News