Battle of the Titans over Huntsman Corp. Deal

Jon Huntsman, Sr. the Chairman of Huntsman Corp., a Texas-based chemical company (not to be confused with his son, Jon Huntsman, Jr., the Governor of Utah), is fighting mad. In July 2007, Leon Black’s private-equity firm, Apollo Management L.P. agreed to buy Huntsman for $6.5 billion. Now, Black wants to back out of the deal, claiming Huntsman’s operations have deteriorated, according to this report in the Wall Street Journal.

Before Apollo came along, Huntsman Corp. was to be sold to Access Industries at a price of $25.25/share. Apollo’s bid came in at $28/share, which Jon Huntsman says would mean $1.3 billion for him, his nine children and 56 grandchildren. Apollo determined in June 2008 that the deal would be a disaster and sued in Delaware seeking a declaration that the deal need not be consumated. Determined to force Apollo to stick to its agreement, Huntsman has sued Apollo in Texas.

We’ve heard the story before. As credit has tightened, a number of private equity firms have sought to back out of buyouts. We reported on one such instance here. Barron’s provides a nice overview of the problems the private equity industry is facing here. In such transactions, the WSJ points out, the buyer will often invoke a standard clause permitting the buyer to back out if there are “material adverse effects” (MAE) prior to closing. If the court finds that Huntsman Corp. has suffered such effects, Apollo can walk away from the deal. Otherwise, Apollo would be liable for a $325 million cancellation fee. According to Huntsman’s attorneys, Delaware courts have never excused a buyer based on such an MAE clause.

[Jeremy Telman]