Topic: DE Case Law

Delaware Recognizes Reality of Merger Negotiations in Upholding Application of Business ‎Judgment Rule

In In re Towers Watson & Co. Stockholders Litigation, 2019 WL 3334521 (Del. Ch. July 25, 2019), the Delaware Court of Chancery applied the business judgment rule to dismiss a stockholder suit challenging the $18 billion merger of equals between Towers Watson & Co. and Willis Group despite allegations of imperfections in the merger negotiations.

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Understanding Delaware Appraisal Risk Today

Exposure to claims for appraisal can be a significant risk in merger and acquisition transactions in ‎which dissenter’s appraisal rights are available. This risk has increased in recent years as ‎aggressive investors realized the opportunities presented by appraisal arbitrage, including the high ‎rate of interest payable on appraisal awards, even for shares purchased after announcement of the ‎transaction.‎

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Delaware Court of Chancery Confirms Ability of Stockholders to Assert Third-Party Beneficiary Claims Under Merger Agreements

A common provision in merger agreements is denial of the right of non-parties to the agreement to assert third-party beneficiary claims.  The use of this provision left open the question whether stockholders of a disappearing target company could enforce contractual undertakings of the acquirer following the closing of the merger.

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Attempt to Limit Directors’ Liability for Setting Their Own Compensation is Rejected

A recent Delaware Court of Chancery decision ‎ on a challenge to Goldman Sachs directors’ ‎setting their own compensation is interesting because the court rejected the company’s attempt to ‎make an end run around current law. The stockholder-approved compensation plan included a ‎novel provision limiting the directors’ liability if they acted “in good faith.”‎

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Delaware Court of Chancery Provides Reminder of Importance of Privilege Carve-Out Provision ‎in Merger Agreement

On May 29, 2019 in Shareholder Representative Services, LLC v. RSI Holdco, LLC,‎ ‎ the ‎Delaware Court of Chancery, by giving effect to a merger agreement provision, reemphasized the ‎guidance it gave in Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP ‎ that a ‎seller in a private-company merger may use its “contractual freedom” to retain the attorney-client ‎privilege for pre-closing communications by including explicit language to that effect in the ‎merger agreement.‎

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Delaware Supreme Court Reemphasizes Importance of Deal Price in Reversing Aruba ‎Appraisal Decision

On April 16, 2019, the Delaware Supreme Court, in a per curiam decision in Verition Partners Master Fund Ltd. v. Aruba Networks, Inc.,[1] reversed the Court of Chancery’s determination that the fair value of Aruba’s stock for appraisal purposes was its unaffected average share price ($17.13 per share) during the 30 days of trading before announcement of its acquisition by Hewlett Packard (H-P).

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Controlling Stockholder Transactions: Delaware Supreme Court Clarifies When It Is Too Late for Business Judgment Review

In Olenik v. Lodzinski, the Delaware Supreme Court found that the conditions required for business judgment review of a controlling stockholder transaction under the MFW standard were not in place “at the outset” of the transaction and reversed the Chancery Court’s dismissal of the case.

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