Family-owned Huntsman Corporation has hit back in the battle over its proposed merger with Hexion Specialty Chemicals by suing private equity firm Apollo Management and its two founders for $3 billion. The company claims Leon Black and Joshua Harris induced it to terminate a previous merger agreement with Dutch chemical company Basell in favour of an alternative merger agreement with Apollo affiliate Hexion.
"It is now clear that, to get Huntsman to terminate its contract with Basell, Apollo falsely represented 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," said Peter Huntsman, president and CEO.
Peter's father and company founder Jon M Huntsman (pictured) said he was "outraged" at the behaviour of Black and Harris and said the family business would do everything in its power to hold them accountable. "While personally and repeatedly assuring our board of directors, our senior officers, our financial advisors and me of their earnestness, they instead pursued a strategy designed to cause us to terminate with Basell to accept promises they never intended to keep – all calculated to contrive a nonexistent 'purchase option' we specifically refused to grant Hexion during our negotiations, awaiting the day when they would try to force us to concede a price reduction," he said.
A statement posted on Hexion's website read “It is unfortunate that Huntsman has chosen to file a baseless lawsuit against Apollo and to personally sue two of its principals. Huntsman’s Texas suit violates a clear provision of the merger agreement which requires that any litigation be brought exclusively in the State of Delaware."
The move follows a lawsuit filed against Huntsman last week by Hexion, which claimed that the capital structure agreed to by Huntsman and Hexion for the combined company was no longer viable because of Huntsman's increased net debt and its lower than expected earnings.
"While the impression created by Apollo's recent statements about Huntsman's financial performance and strength almost seems designed to inflict damage to our company and its relationships with its employees, suppliers and customers, in fact Huntsman is a strong and profitable company, with ample financial resources to continue operating our business," concluded Peter.
Hexion has noted, however, that Huntsman’s suit does not dispute that the combined company would be insolvent. "We believe Huntsman’s lawsuit is wholly without merit,” it said.
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