If solely Jon Huntsman was tweeting in 2008. The billionaire industrialist had introduced a 12 months earlier the sale of his listed chemical substances firm, Huntsman Corp, to the non-public fairness titan Apollo Global Management for $10.6bn.
In June 2008, as the worldwide monetary disaster was unfolding, Apollo’s portfolio firm, Hexion, ditched the acquisition, citing Huntsman’s sagging monetary efficiency.
The subsequent authorized struggle can be dramatic and the ruling within the Delaware Court of Chancery on the case would turn out to be a seminal precedent in busted deal litigation, of the sort that’s related once more as we speak within the Twitter/Elon Musk battle.
The Huntsman/Apollo inferno was additionally notable for the Huntsman household’s fury in the direction of Apollo and two of its founders, Leon Black and Josh Harris, whom the Huntsmans believed had acted in exceptionally dangerous religion. Jon Huntsman advised the Wall Street Journal that the pair “should be disgraced”. His son Peter mentioned he discovered Apollo “absolutely pathetic”. One wonders what caustic memes they might supply on social media if the dispute was taking place now.
In 2014, Jon Huntsman revealed his autobiography. A chapter dedicated to the Apollo affair was merely titled, “The Double Cross”. He re-aired his views on Black and Harris: “When the other side intentionally plays dirty, it is infuriating. In its efforts to back out of the deal, Apollo was willing to destroy me, the company and our values.”
Ultimately, Apollo didn’t purchase Huntsman, with the New York agency and its lenders paying nearly $3bn in settlement proceeds. At the tip of the chapter, Huntsman makes a rare admission that, in hindsight, letting Apollo off the hook labored out for the very best. It is a lesson the Twitter board ought to mirror on as they fine-tune their authorized technique to tackle Musk.
Huntsman’s grievance was about not simply Apollo strolling away, however how the agency did it. In June 2008, Hexion revealed a press launch asserting that it believed that the mixed firm can be bancrupt, that its banks couldn’t present the bridge financing and due to this fact it was leaping ship. Huntsman was blindsided and later mentioned the missive had instantly broken its enterprise.
Apart from the Delaware litigation that sought to implement the merger settlement, additionally in June 2008, Huntsman sued Apollo as properly Leon Black and Josh Harris personally in Texas state courtroom for fraud and “tortious interference”. The latter is a authorized doctrine that had bankrupted the oil firm Texaco within the Eighties for its function in a mergers and acquisitions struggle.
Later that 12 months, the Delaware trial dug into Apollo’s conduct main as much as the press launch. Hexion, with the assistance of attorneys at Wachtell Lipton — the identical agency working with Twitter now — had discovered a consultancy to render the insolvency opinion after, apparently, Hexion had put its thumb on the scales, the decide urged.
Apollo’s gambit to this present day shocks even jaded Wall Street attorneys and financiers. The Delaware decide was not impressed both. He discovered that Hexion had “knowingly and intentionally breached numerous of its covenants under that contract”. He couldn’t power Hexion to honour a so-called “specific performance” clause that dedicated it to complete the deal.
However, the decide did order the Apollo-owned firm to honour the opposite provisions of the contract, most notably pursuing Credit Suisse and Deutsche Bank — Huntsman had sued them individually for strolling away — to fund the deal.
By the tip of 2008, Apollo settled all litigation it confronted with Huntsman for $675mn (one other $325mn was funded by the banks). The two banks’ personal settlement in 2009 would are available in at $1.7bn within the type of money and low-cost loans for Huntsman.
In the years after the decision of the struggle, Wall Street and lecturers debated who “won” and “lost” between Apollo and Huntsman. As a matter of legislation, Huntsman had roundly defeated Black and Harris in Delaware. But in the end, implementing the merger contract and getting their cash-out funds was too onerous.
Apollo had averted the potential of dropping all its fairness within the Huntsman/Hexion mixture. That got here at the price of litigation anguish, reputational tarnish and settlement funds.
Jon Huntsman wrote that even when the corporate had received its billions in money, watching it go bankrupt, as it could have carried out upon closing the Hexion deal, would have been insufferable. Instead, Huntsman shareholders saved your complete firm and pocketed nearly $3bn in settlement funds. Huntsman shares would rally from $2.30 every in 2009 to $40 by 2022.
Twitter will not be a household enterprise. Its diffuse shareholders want Musk to pay the $54.20 a share that they bargained for. Musk, if pressured to shut, will tackle $13bn of debt amid a softening financial system, forcing him into robust enterprise selections that may damage remaining stakeholders together with workers and Twitter’s tens of millions of customers.
Huntsman, who died aged 80 in 2018, prolonged an olive department to his former adversaries on the finish of the Apollo chapter of his ebook, writing that he had put behind him the “ill will” he as soon as harboured. In what might have been a gracious tweet, Huntsman wrote within the ebook, “To be totally up front, I still have affection for both Leon and Josh.”
sujeet.indap@ft.com
Source: www.ft.com