A Texas federal judge on Monday blocked a bid by Swiss chemical conglomerate INEOS Technologies USA LLC to stop BASF Corp. from selling a catalyst unit to W.R. Grace & Co., holding that BASF had complied with a contractual requirement giving INEOS the right of first refusal to buy the catalyst assets.
INEOS isn’t likely to succeed on the merits of its breach of contract claim that aims to stop the sale of a catalyst production unit from BASF to W.R. Grace, U.S. District Judge Vanessa Gilmore held in a ruling denying INEOS’ request for a preliminary injunction.
According to court records, W.R. Grace had agreed to buy assets from BASF, including catalyst production assets it had valued at €70 million ($78 million), but INEOS wanted to exercise a right of first refusal under a 2009 supply agreement, to buy the assets for €22 million.
INEOS accused BASF of inflating the value of the assets as part of a bigger deal with W.R. Grace, and said that BASF had provided it a deliberately vague notice of the sale that included only the most boilerplate terms of the deal. It argued that because BASF didn’t comply with the contract’s requirement to set out an offered price for the catalyst production assets alone, it had the right to buy those assets at a lower price.
BASF argued that the underlying supply agreement between INEOS and BASF doesn’t give INEOS the right to block sale prices “it thinks are too high.” It said that INEOS had raised a “self-interested assertion” that it would have paid less for the assets, which it argued could not support a finding that the W.R. Grace offered price was not bona fide.
Judge Gilmore held that BASF had complied with the supply agreement’s terms and said that INEOS had not shown a likelihood of success on the merits of its claim.
“Because the court finds that the evidence supports defendants’ claim that they have complied with the parties’ supply agreement, the enforcement of an injunction would not serve the public interest,” she wrote.
Under a 2009 supply agreement between INEOS and BASF, INEOS has a right of first refusal for the catalyst assets. The terms of the 2009 agreement provide that “in the absence of an offered price for the catalyst production assets alone,” the price for the assets would be set according to a formula laid out in the contract, which INEOS described as a multiple of earnings of the assets.
INEOS contends that the W.R. Grace valuation did not equate to an offered price for the catalyst assets, and told BASF on April 18 — the day the refusal period expired — it would pay €22 million for the assets under the formula set out in the agreement.
BASF rejected that offer two days later, saying that INEOS would have had to meet the €70 million offer price from W.R. Grace.
INEOS filed suit in state court on April 25, alleging anticipatory breach of contract, and seeking a declaratory judgment it had exercised its right to buy the assets at the formula price. The case was then removed to federal court.
Lawyers for the parties did not immediately respond to requests for comment on Tuesday.
BASF filed a motion to dismiss the case several days after the injunction hearing. Briefing on the motion should be completed in June.
INEOS is represented by Murray Fogler and Robert Ford of Fogler Brar Ford O’Neil & Gray LLP.
BASF is represented by Winn Allen, Anna Rotman and Mike Williams of Kirkland & Ellis LLP.
The case is INEOS Technologies USA LLC v. BASF Corp., case number 4:16-cv-01145, in the U.S. District Court for the Southern District of Texas.
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