“Hexion v. Huntsman Corp.: Can Insolvency Justify Buyer’s Remorse?”
On Sept. 29, 2008, Vice Chancellor Stephen P. Lamb of the Court of Chancery of the State of Delaware, after a six-day trial, entered an opinion in the case of Hexion Specialty Chemicals Inc. v. Huntsman Corp. in favor of Huntsman. Hexion and Huntsman entered into a merger agreement that Hexion sought to escape by obtaining a declaratory judgment that, in essence, Hexion was not obligated to consummate the deal because the resulting combined entity would be insolvent if the merger were completed.
To Hexion, the issue was whether the combined entity would in fact be insolvent on the closing date, and Hexion obtained a solvency opinion from a recognized financial advisory firm to support that position. To Huntsman, there was no solvency issue because the solvency of the merged entity would not contractually excuse Hexion’s obligations to close the merger and the merged entity would in any event be solvent. These conflicting positions set into motion a scenario regarding the potential solvency of the merged entity that, when viewed through the prism of the current economic climate, may be seen again in other valuation situations.