Huntsman fingers banks in failed $6.5B merger

CONROE, Texas (Reuters) -- Peter Huntsman never would have agreed to sell the $4.5 billion chemical company founded by his father if he thought the banks funding the deal could wiggle out of their commitment, the executive told a Texas court Tuesday.

"This is about certainty," Huntsman, president and chief executive officer of Huntsman Corp., told a jury in state district court located in a town about 40 miles north of Houston. "We're selling 40 years, two generations of life's work."

Huntsman is suing Credit Suisse Group AG and Deutsche Bank AG for more than $4.6 billion in damages for their role in the failed $6.5 billion takeover of the company.

The banks were lenders in a 2007 buyout led by private equity firm Apollo Management LP that fell apart after Apollo and the banks backed out of the deal, claiming it would create an insolvent company as the U.S. economy deteriorated.

Under questioning from company lawyers, Peter Huntsman said the company agreed to a higher offer price from Apollo's Hexion chemicals business even though the private equity firm had burned them in earlier negotiations.

So any deal struck, Huntsman told the jury, hinged on the soundness of financing.

And in the end, Huntsman believed it negotiated "a rock-solid, ironclad agreement," the CEO told the court.

On Monday in opening arguments, lawyers for Huntsman alleged the investment banks had no intention of honoring contracts to finance the takeover of Huntsman Corp. and had a side deal designed to protect themselves.

And after the deal was signed, the banks scrambled to change the terms of their commitments in an effort to reduce exposure as the credit markets turned against them, Huntsman testified.

"The commitment to fund this transaction was really being pushed over here to Apollo, which is not really even a bank," the CEO told the jury.

The buyout, struck in July 2007, was one of the last big deals signed in an era where credit was readily available to private equity firms.

When the global credit crisis hit, Deutsche Bank (DB) and Credit Suisse (CS) were unable to syndicate the deal's hefty debt load.

Huntsman (HUN, Fortune 500) later sued to complete the sale to Apollo. Huntsman won that lawsuit and later agreed to settle with Apollo for $1 billion.

The two banks were Huntsman's primary lenders and were chosen to back the financing because the company did not trust Apollo to close the deal, Huntsman's lawyers contended.

"There's no point in having a merger if you don't have the funding to back that up," Huntsman told the court.

The trial is scheduled to last six weeks before Judge Fred Edwards.