Huntsman seeks $3 billion in damages from Apollo over failed merger with Hexion

By Lisa Kerner

Charlotte, N.C., June 23 - Huntsman Corp. filed suit against Apollo Management, LP and its founders Leon Black and Joshua Harris in Conroe, Texas, for "fraud and tortious interference."

According to Huntsman, Apollo induced it to terminate its merger agreement with Basell AF in favor of a transaction with Apollo affiliate Hexion Specialty Chemicals, Inc.

It was previously reported that Huntsman's board terminated a prior merger agreement with and paid a $200 million break-up fee to Basell after determining Hexion's proposal was superior. Hexion is now seeking to end its deal with Huntsman.

Huntsman said it is seeking a jury trial to determine the defendants' liability to Huntsman for actual damages exceeding $3 billion, plus exemplary damages.

On July 12, 2007, Hexion agreed to acquire Huntsman in an all-cash transaction valued at approximately $10.6 billion, including the assumption of debt. Huntsman shareholders approved the deal in October 2007.

Huntsman planned to enforce its rights under the merger agreement with Hexion after Hexion went to court to terminate the deal, a prior Huntsman news release said.

"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," president and chief executive officer Peter Huntsman said in the release.

"We intend to pursue every available legal action required to hold Apollo, Black and Harris responsible for their ruinous actions," Huntsman added.

Huntsman also intends to vigorously contest the "false and misleading allegations" made in a suit filed in Delaware by Apollo and Hexion last week.

On June 18, Hexion announced that it had filed suit in the Delaware Court of Chancery to declare its contractual rights under its agreement with Huntsman, alleging that the agreed-upon capital structure for the combined company is no longer viable because of Huntsman's increased net debt and its lower-than-expected earnings.

Hexion believes that completing the merger on the basis of the capital structure would render the combined company insolvent, it was previously reported.

The suit also alleges that Huntsman has suffered a material adverse effect under the merger agreement.

Hexion CEO and president Craig O. Morrison, in a June 23 letter to Huntsman, said several of Huntsman's significant shareholders asked for the sealed version of the verified complaint Hexion filed in Delaware.

"Clearly, Huntsman shareholders want to see how much Huntsman's debt has increased, how much Huntsman's performance has declined, and how large the funding gap is between the amount of funds available under our commitment letter and the amount necessary to close the transaction, and use this information to make their own assessment of whether the combined company would be insolvent," Morrison said in the letter, which was included in a form 8-K filing with the Securities and Exchange Commission.

Morrison said Hexion has "no problem" with providing Huntsman shareholders access to the facts alleged in its complaint.

Hexion, in a separate statement, called Huntsman's lawsuit "baseless" and "wholly without merit."

Based in Columbus, Ohio, Hexion makes thermoset resins. Huntsman is a Salt Lake City manufacturer of differentiated chemicals and pigments.

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