A Delaware judge ruled Monday that Apollo Management LP can't renege on a $6.54 billion agreement to buy Huntsman Corp. and must comply with the terms of the purchase agreement.
In a 91-page ruling, Delaware Chancery Court Judge Stephen Lamb stated Apollo and Hexion Specialty Chemicals Inc. — the company through which Apollo intended to buy Huntsman — had "knowingly and intentionally" breached their obligations by trying to back out of a July 12, 2007, purchase agreement to buy Salt Lake City-based Huntsman.
"Under the merger agreement, Hexion had no right to terminate the agreement based on potential insolvency of the combined company or due to lack of financing," Lambert wrote.
A Hexion spokesperson did not respond to an e-mail request for comment Monday night.
Huntsman sells epoxy resins, polyurethanes and other specialty chemicals. The company is based in Salt Lake City, but it operates from The Woodlands, Texas.
Huntsman Corp. president and CEO Peter Huntsman said the Huntsman family is elated over the judge's ruling.
"Personally, it is everything I was hoping it to be and then some," he said.
His father, Jon Huntsman Sr., company founder and chairman, could barely speak when he heard the ruling, Peter Huntsman said.
"He broke down," he said. "He just started crying. He was so emotional after all that he has been through."
The ruling not only bodes well for the Huntsman family, it also
bears substantial benefits for Utah, Peter Huntsman said. If the company is sold as planned, an estimated $700 million will go toward Jon Huntsman Sr.'s humanitarian and philanthropic endeavors, particularly in cancer research. But those goals were bogged down by Hexion's attempts to terminate the agreement by claiming Huntsman was insolvent.
"They accused us of not running our business well," Peter Huntsman said. "They accused us of a number of misdeeds."
On June 26, 2007, Huntsman, the sixth-largest U.S. chemical company, announced it would be sold to New York-based Access Industries Holdings LLC through its Basell Holding BV chemical unit of the Netherlands for $5.88 billion, or about $25.25 per share.
Three days later, Apollo upped the ante with a $6.54 billion offer, or about $28 per share. Apollo planned to purchase Huntsman through Hexion — based in Columbus, Ohio — a company it formed through several acquisitions.
On June 18, Apollo and Hexion filed a complaint in Delaware Chancery Court to back out of the deal, saying it was no longer viable because Huntsman's debt had increased and profits wouldn't meet previous forecasts. In the lawsuit, they said that lenders Credit Suisse Group and Deutsche Bank A may not finance the deal because the combined companies would be insolvent.
Jon Huntsman Sr. was incensed at the attempt to back out of the deal.
"Apollo's recent action in filing this suit represents one of the most unethical contract breaches I have observed in 50 years of business," he said in an e-mail statement at the time.
In addition to the cash, the transaction included $4 billion of assumed debt and $100 million toward a $200 million fee that Huntsman paid Access to end their merger agreement.
The company has suffered significant financial downturns because of the legal battle with Apollo and Hexion, Peter Huntsman said. As of Monday, the company's stock was just below $8 per share.
"That's about $5 billion in damages that has been done to our stockholders because of their misdeed," he said.
Peter Huntsman said the family hopes Apollo and Hexion will go through with the judge's order to complete the purchase.
Huntsman officials said they will continue to seek more than $3 billion in damages in a separate lawsuit against Apollo and its partners Leon Black and Joshua Harris.
Lambert has set the closing date for Wednesday, although that date could be extended until the court determines Hexion has complied with the terms of the order.
Peter Huntsman said his father is looking forward to channeling money from the sale to his philanthropic efforts.
"I know my father is very keen to see that foundation fully funded and be in a position where it can grow in perpetuity," he said.
E-mail: jdana@desnews.com