Hexion v. Huntsman: Delaware Court Reiterates High Bar to Finding an MAE; Provides Guidance on Requirements of "Reasonable Best Efforts"


On September 29, the Delaware Court of Chancery issued its opinion in the dispute between Hexion Specialty Chemicals and Huntsman over their $10.6 billion merger agreement. In sum, the court found that:

*despite a downturn in the business of Huntsman, no material adverse effect (MAE) had occurred, and

*Hexion had breached its obligations to use reasonable best efforts to facilitate the merger and, because at least some of these breaches were ?knowing and intentional,? could be liable for damages in excess of a $325 million cap that might otherwise apply.

Accordingly, the court ordered Hexion to perform its covenants to facilitate the merger, including its covenants with respect to Hexion?s contemplated financing. The court noted that the merger agreement did not contemplate an order to consummate the merger itself, although a failure to consummate the merger in violation of the merger agreement could lead to monetary damages against Hexion.

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