Huntsman's Trial Against European Banks Begins
The Associated Press
06/15/09 - 02:52 PM EDT
ERNEST SCHEYDER
NEW YORK (AP) Huntsman Corp. told a Texas courtroom Monday that two European banks schemed with a private-equity company to scuttle a $6.5 billion buyout of the chemicals maker last year.
The company is seeking up to $4.6 billion from Switzerland's Credit Suisse and Germany's Deutsche Bank.
A year after a deteriorating economy led to an exodus of billions in private-equity money from several proposed takeovers, Huntsman's is one of the few that has not been resolved, at least legally.
Sallie Mae, 3Com Corp., Affiliated Computer Services and United Rentals are among the companies targeted by private-equity firms, and subsequently dropped as buyout targets when economic conditions worsened and balance sheets deteriorated.
Huntsman claims the banks worked behind the scenes to renegotiate a funding agreement with Hexion Specialty Chemicals' owner, the private equity firm Apollo Management.
The chemical industry had some of the highest profile deals fail or head to court. Two of them included Dow Chemical. First, Kuwait scrapped a $17.4 billion joint venture with Dow. Dow, suddenly short on cash, postponed its $16 billion buyout of specialty chemicals maker Rohm & Haas. That case was settled right before it went to trial this spring.
Hexion agreed to buy Huntsman in July 2007 for $6.5 billion, with Credit Suisse and Deutsche Bank providing the financing.
Hexion began backpedaling last summer and Apollo pushed in court to have the agreement canceled, citing Huntsman's deteriorating finances.
A Delaware judge ordered Apollo to try to close the deal anyway, but Credit Suisse and Deutsche bank said they wouldn't fund it.
The two chemical companies parted ways and Huntsman received a $1 billion settlement.
Woodlands, Texas-based Huntsman, still rattled by the recession and falling sales, then sued the banks in a Texas court, citing interference with its business.
In 2007, Huntsman was in talks to sell itself to Basell Holdings, with Citigroup on board to fund the deal.
The only reason Huntsman accepted the richer offer from Hexion, the company said, was because of the solid financing offered by Credit Suisse and Deutsche Bank.
"We are fully confident that we will be vindicated following a trial on the merits, including the issue of the combined company's insolvency," the banks said in a joint statement.
Huntsman claims, as a second part of its lawsuit, that the European banks also interfered with the Basell deal. The company has asked for a separate $3.6 billion in damages related to that claim.
The Texas jury could find that the banks interfered with either the Hexion or Basell deals, or both. If it finds for Huntsman on both counts, the company would have to choose between the $4.6 billion payout for the Hexion claim, or the $3.6 billion for the Basell claim.
If the jury finds in favor of Huntsman, the award will far exceed the company's $1.6 billion market capitalization.
