Monday, June 15, 2009

Huntsman Seeks Billions From Banks in Trial Over Failed Buyout

Credit Suisse Group AG and Deutsche Bank AG should pay Huntsman Corp. more than $13 billion in damages for interfering with an acquisition of the company and then refusing to fund another buyout bid, lawyers for the chemical maker said.

Attorneys for Salt Lake City-based Huntsman told jurors in state court in Conroe, Texas, today that the company turned down a $25.25-a-share offer from a unit of Access Industries Holdings LLC in 2007 to accept a bid of $28 a share from a unit of Apollo Management LLP. Credit Suisse and Deutsche Bank agreed to fund Apollo’s acquisition of Huntsman, the world’s biggest maker of epoxy adhesives.

Apollo’s buyout was scuttled last year when the banks backed out of funding the deal amid concern that the U.S. economic slump would leave the resulting company insolvent.

“This case is about whether people should be held to what they promise,’’ Huntsman’s lead lawyer, Kathy Patrick, said in an interview before the trial.

The trial in Conroe, north of Houston, may last as long as six weeks, lawyers said. It comes more than a month after Huntsman posted a first-quarter loss of $290 million as the recession cut demand for chemicals used in paints, textiles and building products.

Huntsman already has recovered $1 billion from Apollo. The New York-based private-equity firm made the payment to settle a Huntsman lawsuit after a Delaware judge ruled in September that Apollo must honor the acquisition agreement. Huntsman agreed in December to cancel the buyout as part of the accord.

Delaware Argument

In the Delaware case, Apollo unsuccessfully sought to convince Delaware Chancery Court Judge Stephen Lamb that the recession had so weakened world chemical demand that the combined firm wouldn’t be solvent. Lamb didn’t rule on the solvency issue.

Instead, he found that officials of Apollo’s Hexion Specialty Chemicals Inc. unit couldn’t prove a slowdown in Huntsman’s production or its failure to reach earnings targets caused a “material adverse effect” on the company’s businesses that justified canceling the deal.

In the Texas case, Huntsman seeks as much as $4.6 billion in economic damages if jurors find Credit Suisse and Deutsche Bank interfered with Access’s bid or defrauded Huntsman in connection with Hexion’s offer, Patrick said.

If Huntsman wins, Patrick said she will ask for punitive damages amounting to twice any economic damages the panel awards. That means Credit Suisse and Deutsche Bank may face total damages of as much as $13.8 billion.

‘Doing Our Jobs’

Frankfurt-based Deutsche Bank is Germany’s biggest bank while Zurich-based Credit Suisse is the biggest Swiss bank by market value. The banks will try to convince jurors that the chemical company emerging from the planned combination of Huntsman and Hexion wouldn’t have been solvent.

“We were doing our job as banks by not loaning money to people who can’t pay it back,’’ Irvin Terrell, a lawyer representing both banks in the Texas suit, said in an interview before the trial began.

Terrell said he will ask Judge Fred Edwards to reduce any damage award in the Texas case by $1 billion in light of the Delaware accord.

The case is Huntsman Corp. v. Credit Suisse Securities (USA) LLC, 08-06-09258, 9th Judicial District Court of Montgomery County, Texas (Conroe).