Huntsman

Buyers’ remorse isn’t unusual after a large purchase, but the alternative may be even more unpleasant in the Huntsman saga. The deal to buy the company by Hexion Specialty Chemicals, controlled by private equity firm Apollo Management, came just as the curtain was falling on the buy-out boom. Since then, Apollo and Hexion have been upbraided in the courts for their foot-dragging and now claim to be doing what they can to close the $6.5bn deal, but their lenders failed to meet the latest deadline on Tuesday.

With the purchase price about 140 per cent above Huntsman’s closing level on the eve of the deadline, the deal’s collapse is no surprise. But this story may play out differently from those of other jilted targets who were victims of so-called material adverse change clauses – which allow buyers wiggle room to walk away as markets sour. Those sellers, such as Harman International and SLM, shook their fists but accepted their fate. The wording of the deal for Huntsman left less leeway so Apollo, instead, took the position that a combined firm would be “insolvent” – an opinion successfully challenged in the courts by Huntsman.

Apollo and two of its founders may regret their ploy as they are being sued by Huntsman for $3bn in damages plus $100m in breakup fees that must be paid to Basell, Huntsman’s previous suitor. Hexion’s lenders, Deutsche Bank and Credit Suisse, meanwhile, want no part of the transaction and claimed on Tuesday that Huntsman’s solvency analysis left them “with serious reservations”. In other words, the banks are financially strapped and there are no buyers for leveraged loans these days.

Wall Street’s dealmakers have walked from many deals with little consequence, but might have underestimated fiercely devout chairman Jon Huntsman’s resolve. Perhaps they should have read his book: Winners Never Cheat: Everyday Values We Learned as Children (But May Have Forgotten).

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