Merger Agreement – Delaware Docket

As the Battle over the Universata Acquisition Rages, the Chancery Court Finds that the Appropriate Standard of Review Regarding Actions of a Stockholders’ Representative is “Subjective Good Faith”

Nov 03 2021

By: Gregory R. Youman and Scott G. Ofrias

As the battle over the acquisition of equity in Universata, Inc. continues, the Court of Chancery, in Houseman v. Sagerman, C.A. No. 8897-VCG (Del. Ch. July 20, 2021), resolved two general exceptions asserted by Plaintiffs to the Special Master’s Final Report (“Final Report”). In doing so, the Court decided that an escrow fund was properly created pursuant to the Merger Agreement, and further held that the appropriate standard of review regarding actions of the Stockholders’ Representative is “subjective good faith.” However, the ultimate resolution of all the exceptions awaits further briefing by the parties.

DAMAGES AND TERMINATION FEE CLAIMS REJECTED IN ANTHEM-CIGNA FAILED MERGER SUIT

Jul 30 2021

By: Remsen Kinne and Adam Heyd

In In re Anthem-Cigna Merger Litigation, C.A. No. 2017-0114-JTL (Del. Ch. August 31, 2020), the Delaware Court of Chancery (“Court”) rejected claims for damages by Anthem, Inc. (“Anthem”) and by Cigna Corporation (“Cigna”) for breach of covenants under their Agreement and Plan of Merger entered into on July 23, 2015 (“Merger Agreement”). The Court also ruled against Cigna’s claim for a reverse termination fee.

CEO’s Role in Preparation of a Proxy Statement for a Merger Exposes CEO to Duty of Care Claims

Mar 05 2021

By Lisa Stark and Jonathan Shallow

In In Re Baker Hughes Inc. Merger Litig., C.A. No. 2019-0638-AGB (Del. Ch. Oct. 27, 2020), the Delaware Court of Chancery declined to dismiss claims that the CEO of Baker Hughes Incorporated (“Baker Hughes”) breached his fiduciary duty of care by failing to include unaudited financial statements of the oil and gas segment of the General Electric Company (“GE O&G”) in a proxy statement soliciting the stockholder vote on Baker Hughes merger with GE O&G. As a result, the Court found that (1) the stockholder vote was uninformed, and (2) enhanced scrutiny under Revlon, Inc. v. McAndrews & Forbes Hldgs., Inc., 506 A.2d 173 (Del. 1986). (“Revlon”), not the business judgment review under Corwin v. KKR Financial Holdings LLC (125 A.3d 304, 306 (Del. 2015)), applied to its decision whether plaintiffs had adequately pled a predicate breach of fiduciary duty by the Baker Hughes board for purposes of an aiding and abetting claim asserted against General Electric Company (“GE”). At the time of its decision, none of the Baker Hughes directors were named as defendants in the action except for Baker Hughes’ CEO who was named as a defendant in the action solely in his capacity as an officer of Baker Hughes.

CHANCERY COURT FINDS THAT RES JUDICATA BARS PLAINTIFF’S DEMAND FOR INFORMATION RIGHTS UNDER MERGER AGREEMENT

Mar 29 2020

By: Annette Becker and Caitlin Velasco

In the Memorandum Opinion, Fortis Advisors LLC v. Shire US Holdings, Inc., No. 2018-0933-JRS (Del. Ch. Feb. 13, 2020), the Court of Chancery granted Shire US Holdings, Inc.’s motion to dismiss under the doctrine of res judicata because the breach of contract claim brought by Fortis Advisors LLC arises from the same transaction that was the subject of a prior action (the “2016 Action”) between the parties, Fortis Advisors LLC v. Shire US Holdings, Inc., No. 12147-VCS (Del. Ch. Aug. 9, 2017).

Termination Fee is Not Exclusive Remedy for Breach of No-Shop

Oct 17 2019

By Sara Kirkpatrick and Lisa Stark

On September 9, 2019, the Delaware Court of Chancery held that Genuine Parts Company (“GPC”) adequately pled facts that supported a pleading stage inference that Essendant Inc. breached its merger agreement with GPC by terminating the agreement to pursue a transaction with non-party Sycamore Partners (“Sycamore”) pursuant to a superior proposal termination right. The Court further found that GPC adequately pled that its acceptance of a termination fee from Essendant did not preclude GPC from pursuing breach of contract claims against Essendant for its alleged breaches of the parties’ merger agreement.

earn-out provision of merger agreement requires extrinsic evidence to aid interpretation

Oct 07 2019

By Scott E. Waxman and Pouya D. Ahmadi

In Western Standard, LLC, v. SourceHOV Holdings, Inc. and Pangea Acquisitions, Inc., C.A. No. 2018-0280-JRS (Del. Ch. July 24, 2019), the Delaware Court of Chancery (the “Court”) refused to the grant SourceHOV Holdings, Inc. (“SourceHOV”) and Pangea Acquisitions, Inc.’s (“Pangea”) motion to dismiss, holding that more extrinsic evidence was needed for the Court to be able to interpret the terms of the merger agreement (the “Merger Agreement”) among Pangea and BancTec, Inc. (“BancTec”) and decide whether there was a valid breach of a contract claim.

In a $1.365 Billion Merger, the Target Company “Blindsided” the Proposed Buyer by Terminating the Merger Agreement and the Court Upheld the Termination; Court Requests Further Briefing re the $126.5 Million Reverse Termination Fee

Oct 02 2019

By: Kevin Stichter and Tami Mack

In Vintage Rodeo Parent, LLC et al. v. Rent-A-Center, Inc., C.A. No. 2018-0927-SG (Del. Ch. March 14, 2019), the Delaware Court of Chancery (the “Court”) held that the target company Rent-A-Center, Inc. (“Rent-A-Center”) validly exercised its right to terminate the $1.365 billion merger under the merger agreement (the “Merger Agreement”) among Rent-A-Center and the proposed buyer Vintage Capital Management, LLC and certain affiliates (collectively, “Vintage”), despite Vintage’s claims that the term of the Merger Agreement had already been extended or, alternatively, that Rent-A-Center had not validly terminated.

Chancery Court Requires all Sellers to be Joined to a Rescission Claim Relating to Merger Agreement; Allows Unjust Enrichment Claim to Proceed

Jul 01 2019

By David Forney and Mark Hammes

In Shareholder Representative Services LLC v. RSI Holdco, LLC, C.A. No. 2018-0517-KSJM (Del. Ch. May 22, 2019), the Court of Chancery held that the buyer could not seek remedy outside of the scope of a merger agreement from the sellers’ representative without bringing in all sellers as parties to the action because the representative’s authority was limited to matters relating to or arising under the four corners of that agreement. The Court also denied the representative’s motion to dismiss the buyer’s unjust enrichment claim because the buyer properly alleged that the contract arose from sellers’ wrongdoing.

Delaware Chancery Court Rejects Fraud-Based and Uncapped Indemnification Claims of Great Hill Partners Against the Founders of Plimus

Dec 21 2018

By: Peter N. Flocos and Joanna Diakos

In a case arising out of the purchase by Great Hill Partners of Plimus (now known as BlueSnap, Inc.), the Delaware Court of Chancery, after a 10-day trial and extensive post-trial briefing and oral argument, recently rejected all of the fraud-based claims made by Great Hill against the two founders of Plimus, Messrs. Daniel Kleinberg and Tomer Herzog (the “founders”), who were also directors and major shareholders of Plimus at the time of the transaction. The Court’s decision in Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, No. 7906-VCG, 2018 WL 6311829 (Del. Ch. Dec. 3, 2018), is notable for its rejection of several claims Great Hill pressed for years after initiating the litigation in September 2012.

Delaware Chancery Court Makes Groundbreaking “Material Adverse Effect” Finding Allowing Buyer to Terminate Merger Agreement

Oct 12 2018

By: Peter Flocos, Lisa Stark, Rick Giovannelli and Mark Hammes

In a landmark decision, a Delaware court has, for what is widely believed to be the first time ever, found that a material adverse effect actually occurred in an acquisition transaction, giving the buyer a right to terminate the pending transaction. In Akorn, Inc. v. Fresenius Kabi AG,[1] the Delaware Court of Chancery (the “Court”) held, following a trial, that the buyer properly terminated the parties’ merger agreement, due to such a material adverse effect between signing and closing, under the terms of the agreement and the pertinent Delaware case law. Unlike prior decisions rejecting buyer material adverse effect claims,[2] the Court found that a pre-closing decline in the business of the target – Akorn – was not merely a “cyclical trend” and was likely to have a post-closing, durationally-significant effect that was “material when viewed from the longer-term perspective of a reasonable acquiror.”[3] Although groundbreaking, the Akorn decision reflects that the Delaware courts will still approach the question of whether an MAE has occurred on a case-by-case basis and does not establish a particular “bright line” test.

Catagory:Merger Agreement