The Delaware Court of Chancery has ruled that Hexion Specialty Chemicals Inc. is obligated to go through with its bid to acquire Huntsman Corp. for $10.6 billion.
In the Sept. 29 ruling, Vice Chancellor Stephen Lamb ordered Hexion and primary owner Apollo Management LP to honor the deal, officials with Salt Lake City-based Huntsman said in a news release.
The court said Hexion intentionally breached a number of obligations at Apollo's direction, according to Huntsman.
``We have claimed all along that Apollo would resort to any means necessary to break a legal and binding contract,'' said Huntsman founder and Chairman Jon Huntsman in the release. ``Apollo was dishonest and untruthful and lost the case.''
In a Sept. 30 news release, officials with Columbus, Ohio-based Hexion said they are ``disappointed by the court's decision [and] are reviewing the decision'' and their options.
Looking ahead, Hexion is likely to walk away from the deal and pay a $325 million breakup fee, according to Jignesh Shah, an analyst with Chemical Market Resources Inc. in Houston.
``It would be very hard to get financing after you've said that the combined company would not be solvent,'' Shah said in a telephone interview.
If Hexion does indeed withdraw, Huntsman might prefer to wait until the petrochemical market exits its current trough period before looking for a new buyer or partner, Shah added. Otherwise, he said, its sale price would be much lower that the $10.6 billion Hexion had offered.
Huntsman continues to seek $3 billion in damages from Hexion and Apollo partners Leon Black and Joshua Harris through a suit filed in state court in Conroe, Texas, where portions of Huntsman's business are based.
The court in Conroe also issued temporary restraining orders Sept. 30 against Credit Suisse and Deutsche Bank, prevent- ing them from terminating their financing of the Hexion/Huntsman deal until a full hearing is held. Huntsman requested the orders, which were issued by District Judge Fred Edwards.
Hexion and Apollo had tried to exit the deal, which was first proposed in mid-2007, by claiming that Huntsman's financial performance had deteriorated greatly since the original offer was made. Huntsman posted a loss of $172 million in 2007.
A combined Hexion/Huntsman ``cannot now support the debt load that was agreed to at the time the transaction was put together,'' Hexion Chairman, President and Chief Executive Officer Craig Morrison said when Hexion filed its breakup request in June.
Hexion's original offer equated to a purchase price of about $28 per share. Huntsman's per-share stock price was under $8 on Sept. 29, but news of the court ruling sent it above $11 on Sept. 30, and above $12 on Oct. 1. It receded to around $11 in early trading Oct. 3.