PHILADELPHIA (Reuters) - U.S. specialty chemicals maker Huntsman Corp HUN.N on Monday said it filed a lawsuit against private equity firm Apollo Management and its partners, seeking more than $3 billion in damages, as the legal battle escalated in the souring merger deal between Huntsman and Hexion Specialty Chemical.
Huntsman said it sued Apollo and partners Leon Black and Joshua Harris in Conroe, Texas, arguing that they had induced Huntsman end a merger deal with Dutch company Basell AF BASL.UL in order to forge a merger with Apollo affiliate Hexion.
Last year, Huntsman accepted Hexion’s $28 a share bid and terminated a previous agreement to be acquired by plastics and chemicals company Basell for $25.25 per share. Since then, Basell has acquired U.S. chemicals firm Lyondell Chemical Co.
“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,” Huntsman Chief Executive and President Peter Huntsman said in a statement.
Huntsman said it asked for a jury trial to determine liabilities for actual damages of more than $3 billion, plus other damages.
The lawsuit comes after Apollo and Hexion sued Huntsman last week in an effort to limit their liability in case the planned deal between Huntsman and Hexion collapsed.
Hexion said it believes Huntsman’s lawsuit to be without merit.
“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,” Hexion said.
Apollo previously contended that Huntsman had suffered a material adverse change and said an independent financial advisor found that the combined company would be insolvent if the deal were to proceed under the agreed terms.
“In fact, Huntsman’s suit does not dispute that the combined company would be insolvent,” Hexion said.
Apollo also had argued that the deal was no longer feasible because of Huntsman’s increased net debt and its lower-than-expected earnings. Huntsman’s first-quarter adjusted earnings fell more than 70 percent from a year ago.
Huntsman said it planned to contest the “false and misleading” accusations Apollo and Hexion made in their Delaware lawsuit last week.
Huntsman said it expects its second-quarter adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) to be in line with the first quarter’s.
The company said it has been increasing prices to offset higher raw material energy costs. It said its financial results in May were stronger than those achieved in April and it expects that trend to continue. Additional details were not provided.
“Huntsman is a strong and profitable company, with ample financial resources to continue operating our business,” Huntsman said.
Shares of Huntsman were down 10 cents, or about 0.8 percent, to $12.74 in midday trading on the New York Stock Exchange.
(Reporting by Jessica Hall, editing by Gerald E. McCormick)