Delaware Chancery Court Judge Stephen Lamb concluded late Monday that Columbus, Ohio-based Hexion didn't have grounds to cancel its $6.5 billion offer for Salt Lake City-based Huntsman because of a slump in the chemical markets. Hexion is the top producer of adhesives used in plywood. Huntsman is the world's biggest maker of epoxy adhesives.
Lamb found Hexion officials "knowingly and intentionally" violated their agreement with Huntsman to complete a merger that would produce one of the world's largest specialty-chemical makers.
"The court recognizes that there remain substantial obstacles to closing this transaction," Lamb said in his 89-page decision. "Some of those result from the current unsettled credit environment."
If Hexion doesn't move to complete the buyout, Huntsman officials have said they'll seek at least $3 billion in damages over the failed deal.
"This ruling is everything that I was hoping for," said Huntsman Corp. CEO Peter Huntsman. "The language of the judge is very, very strong, I'm very heartened to see the forcefulness of the ruling."
Jonathan Gasthalter, a Hexion spokesman, wasn't immediately available for comment on the decision late Monday. Hexion does have the option to appeal the ruling.
Huntsman doubted the chances of an appeal succeeding. "Given the number breaches of contract that the judge found, it would be interesting to see where they would appeal," he said.
If there is no appeal, Huntsman expected the acquisition deal to be finalized in the next 30 days.
Huntsman noted that company shareholders wouldn't be the only beneficiaries of Lamb's decision. Jon Huntsman Sr., the company's founder and board chairman, will channel $700 million to charities from money he gets from the sale.
"Most of those proceeds are destined to Utah charities," Peter Huntsman said. It "will have tremendous impact on the state of Utah."
Huntsman fell $1.26, or nearly 15 percent, Monday in New York Stock Exchange composite trading. U.S. stocks plunged after the U.S. House of Representatives rejected a $700 billion plan to rescue the financial system. The Standard & Poor's 500 Index tumbled the most since the 1987.