A day after the Columbus, Ohio-based Hexion filed a lawsuit in Delaware seeking court approval to walk away from its merger agreement, Huntsman Corp. shares lost nearly 40 percent of their value. They fell $8 on Thursday to close at $12.86.

The decline reduced the value of the 21.7 million Huntsman Corp. shares held by the Huntsman Foundation by nearly $175 million and the 400,000 shares in the hands of the Huntsman Cancer Foundation by $3.2 million.

"All I can say at this point is that I have full confidence everything will work out for the best," said Janet Bingham, president and chief executive of the Huntsman Cancer Foundation, the sole mission of which is to support the Huntsman Cancer Institute.

The Huntsman Cancer Foundation isn't planning to sell its stock any time soon, Bingham said, indicating the foundation was waiting to liquidate those shares when Huntsman Corp. merged with Hexion.

A year ago, around the time Huntsman Corp. announced it was about to be sold, the company's founder and chairman Jon M. Huntsman said the proceeds from the deal would provide "increased financial underpinnings and support for it [the Huntsman Cancer Institute] to accomplish its mission."

He said it also would help the Huntsman Foundation fund increased cancer research and his other charitable endeavors. And those goals remain, backed by Jon and Karen Huntsman's resolve to alleviate suffering worldwide.

"The corporate stock, which we donated to our charitable foundation over a year ago, will remain in that foundation," Huntsman said Thursday.

"We don't measure the value of the donated shares from one day to the next and are confident the foundation will be just fine."

Still, the outcome of that deal with Hexion that called for Huntsman's shareholders to get $28 for each share of stock, appears uncertain.

Hexion, a chemical maker owned by the buyout firm Apollo Management, contended in its lawsuit that Huntsman Corp.'s financial health has suffered from an increase in debt and lower earnings.

It pointed to a study by Duff & Phelps, a financial advisory firm it hired, that indicated completing the merger could risk plunging both companies into insolvency.

Huntsman Corp.'s chairman, however, in a statement issued Thursday said the company he founded is strong and profitable.

"Apollo's recent action in filing this suit represents one of the most unethical contract breaches I have observed in 50 years of business," Huntsman said. "Our company will fight Apollo vigorously on all fronts. First and foremost, we shall protect the interest of our shareholders."

Before a suitor such as Hexion can terminate a proposed merger in Delaware, it must demonstrate to a judge that its proposed partner's worsening results go beyond just a couple of bad quarters, said Larry Hamermesh, a Widener University law professor who specializes in Delaware corporate law issues.

"There has to be some kind of long-term development demonstrated to justifying canceling one of these deals," he said.

Hamermesh added the economic downturn has made such legal disputes more common.

Huntsman stock was trading at a 26 percent discount to the $28 per share deal price before Wednesday's announcement. That indicates investors were expecting the deal to fail, said Hassan Ahmed, a New York-based analyst at HSBC Securities.

Huntsman didn't use enough proceeds from asset sales to pay down debt, and earnings kept falling, said Ahmed. "The deal price never made sense to me. Then the credit crunch happened and the deal definitely didn't look smart."

Peter Huntsman, the president of the company his father founded, said Huntsman Corp. will seek to consummate the merger on the terms it agreed to with Hexion.

"We believe Hexion and Apollo's actions are inconsistent with the terms of the merger agreement and the obligations to Huntsman and its shareholders," he said in a statement. "These actions appear to be a blatant attempt to deprive our shareholders of the benefits of the merger that was agreed to nearly a year ago."

Gov. Jon Huntsman Jr. has no remaining financial interest in the company his father founded.

Huntsman Jr., who was elected in November 2004, reported that in early 2005 after the company's public offering he sold his 1 percent share of Huntsman Corp. for $15 million to $25 million.

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* BLOOMBERG NEWS contributed to this story.