Justia Mergers & Acquisitions Opinion Summaries

This appeal arose from a merger agreement under which two companies involved in the gas pipeline business, Energy Transfer Equity, L.P. (“ETE”), agreed to acquire the assets of The Williams Companies, Inc., (“Williams”). The Merger Agreement signed by Williams and ETE contemplated two steps: (1) Williams would merge into a new entity, Energy Transfer Corp LP (“ETC”); and (2) the transfer of Williams’ assets to ETE in exchange for Class E partnership units “would” be a tax-free exchange of a partnership interest for assets under Section 721(a) of the Internal Revenue Code. After the parties entered into the Agreement, the energy market suffered a severe decline which caused a significant loss in the value of assets of the type held by Williams and ETE. This caused the transaction to become financially undesirable to ETE. This issue ultimately led to ETE’s tax counsel, Latham & Watkins, LLP (Latham) being unwilling to issue the 721 opinion. Since the 721 opinion was a condition of the transaction, ETE indicated that it would not proceed with the merger. Williams then sought to enjoin ETE from terminating the Merger Agreement. The Court of Chancery rejected Williams’ arguments. After review, the Supreme Court found the Court of Chancery adopted an unduly narrow view of the obligations imposed by the covenants in the Agreement. The Supreme Court agreed with Williams that if a proper analysis of ETE’s covenants led to a conclusion that ETE breached those covenants, the burden would have shifted to ETE to prove that its breaches did not materially contribute to the failure of the closing condition. Since the facts as found by the Court of Chancery were that ETE’s lack of conduct did not contribute to Latham’s decision not to issue the 721 opinion, the Supreme Court was satisfied that when the burden of proving that ETE’s alleged breach of covenants is properly placed on it, ETE did meet its burden of proving that any alleged breach of covenant did not materially contribute to the failure of the Latham condition. The Court also agrees with the Court of Chancery’s finding that ETE was not estopped from terminating the Agreement. Accordingly, the judgment of the Court of Chancery was affirmed. View "Williams Companies, Inc. v. Energy Transfer Equity, L.P." on Justia Law

IBM's proposed purchase of Merge Healthcare was supported by a vote of close to 80% of Merge stockholders. Former Merge stockholders sought post-closing damages against the company’s directors for what they alleged was an improper sale process. Merge did not have an exculpation clause in its corporate charter, so its directors have potential liability for acts violating their duty of care, in the context of an allegedly less-than-rigorous sales process. The Delaware Court of Chancery dismissed. Demonstrating such a violation of the duty of care is not trivial: it requires a demonstration of gross negligence, but it is less formidable than showing disloyalty. Regardless of that standard, the uncoerced vote of a majority of disinterested shares in favor of the merger cleansed any such violations, raising the presumption that the directors acted within their proper business judgment. View "In Re Merge Healthcare Inc. Stockholder Litigation" on Justia Law

At issue in this case was a contract dispute between the purchaser (Purchaser) and the seller (Seller) of a corporation pursuant to a corporative merger agreement. The agreement provided for three different liability limitations (damage caps) in the event of Seller’s breaches. Seller breached several requirements of the agreement by failing to use certain accounting principles to accurately establish the financial condition of Seller’s corporation and, accordingly, the appropriate adjustment to the consideration to be paid by Purchaser. The amount of the adjustment was controlled by the indemnity Purchaser was entitled to receive under the relevant damage caps. The circuit court entered final judgment for Purchaser. The agent for the stockholders of Seller and former stockholders of Seller appealed, arguing that the circuit court improperly construed the merger agreement as to which damage cap was controlling under the facts of the case. The Supreme Court agreed with Appellants and reversed, holding that the circuit court applied the incorrect damage cap. View "Shareholder Representative Services v. Airbus Americas, Inc." on Justia Law

Plaintiffs, former stockholders of Auspex, filed a putative class action to challenge the propriety of the merger with Teva Pharmaceuticals and seek post-closing damages, alleging that the members of Auspex's board of directors breached their fiduciary duties by permitting senior management to conduct a flawed sales process that ultimately netted stockholders inadequate consideration for their shares. The directors have moved to dismiss plaintiffs’ Complaint under Rule 12(b)(6). The court granted the motion, concluding that, even accepting plaintiffs' well-pled facts as true, defendants are entitled to invoke the irrebuttable business judgment rule. In this case, plaintiffs have not pled facts that would allow a reasonable inference that the merger involved a controlling stockholder, much less that a controlling stockholder pushed Auspex into a conflicted transaction in which the controller received nonratable benefits. They are left, then, to overcome the cleansing effect of stockholder approval, which in this case was disinterested, uncoerced and fully informed. View "Larkin v. Shah" on Justia Law

At issue in this case was the fair value of stock of ISN Software Corp. (Respondent) held by two minority stockholders, Polaris and Ad-Venture, (collectively, Petitioners) at the time of a merger by which the controller cashed out some, but not all, of the stock held by the minority. The Court of Chancery held (1) the method used by the controller to determine the fair value of the stock is unreliable; (2) a discounted cash flow analysis is the most reliable indicator of fair value; and (3) upon consideration of the expert opinions provided by Petitioners and Respondent, the statutory fair value is $98,783 per share. View "In re ISN Software Corp. Appraisal Litig." on Justia Law

In 2012 Walgreens acquired a 45 percent equity stake in Alliance, plus an option to acquire the rest of Alliance’s equity for a mixture of cash and Walgreens stock. Walgreens later announced its intent to purchase the remainder of Alliance and engineer a reorganization whereby Walgreens would become a wholly-owned subsidiary of a new corporation, Walgreens Boots Alliance. Within two weeks after Walgreens filed a proxy statement seeking shareholder approval, a class action was filed; 18 days later, less than a week before the shareholder vote, the parties agreed to settle. The settlement required Walgreens to issue several requested disclosures and authorized class counsel to request $370,000 in attorneys’ fees, without opposition from Walgreens. The Seventh Circuit reversed approval of the settlement, calling the supplemental disclosures “a trivial addition to the extensive disclosures already made in the proxy statement.” “The oddity of this case is the absence of any indication that members of the class have an interest in challenging the reorganization.... The only concrete interest suggested … is an interest in attorneys’ fees.... Certainly class counsel, if one may judge from their performance in this litigation, can’t be trusted to represent the interests of the class.” View "Hays v. Berlau" on Justia Law

At issue in this case was a company that was acquired for $18 per share in an all-cash merger. Five months earlier, the target company declined an offer of $24 per share from the same acquiror. Plaintiffs, former public stockholders of the target company, sued the company’s board of directors and financial advisor, alleging that the board breached its fiduciary duties in approving the merger and that the financial advisor aided and abetted the breaches. The Court of Chancery granted Defendants’ motions to dismiss for failure to state a claim, holding that the business judgment rule standard of review applied to Plaintiffs’ allegations and insulated the merger. View "In re Volcano Corp. Stockholder Litig." on Justia Law

In 2013, the Company completed a merger that gave rise to appraisal rights. Petitioners, owners of shares of common stock of the Company, seek appraisal. The court concluded that the fair value of the Company on the closing date was $17.62 per share; the legal rate of interest, compounded quarterly, shall accrue on this amount from the date of closing until the date of payment; the parties shall cooperate on preparing a final order for the court; and, if there are additional issues for the court to resolve before a final order can be entered, the parties shall submit a joint letter within two weeks that identifies them and recommends a schedule for bringing this case to conclusion, at least at the trial court level. View "In Re: Appraisal of Dell Inc." on Justia Law

The Company, a developmental biopharmaceutical company, which has researched and developed a drug called NORTHERA, filed a class action alleging breaches of fiduciary duty against defendants in connection with the sale of Chelsea to Lundbeck through a tender offer and short-form merger (the Transaction). Plaintiffs contend that the Board acted in bad faith by instructing its financial advisors to ignore one set of projections in opining on the fairness of the Transaction, and by choosing to disregard a second set of projections before recommending the Transaction to Chelsea’s stockholders. The court granted defendants' motion to dismiss for failure to state a claim under Court of Chancery Rule 12(b)(6). The Board, after deliberation and in consideration of the sale of the Company, instructed its advisors not to consider projections that its assets would increase in value, years in the future, on speculation that the FDA would approve one of its products for currently-prohibited uses, or would remove a competing drug from the market altogether. Both sets of projections involved contingencies over which the Company had no control, and which might never come to pass. Such actions do not, on their face, plead a conceivable breach of the Directors loyalty-based duty to act in good faith. No other grounds conceivably leading to a finding of bad faith are pled. Accordingly, the court affirmed the judgment. View "In re Chelsea Therapeutics Int'l Ltd. Stockholders Litig." on Justia Law

Dell Inc. completed a merger that gave rise to appraisal rights. Fourteen appraisal petitioners were mutual funds sponsored by T. Rowe Price & Associates, Inc. (T. Rowe) or institutions that relied on T. Rowe to direct the voting of their shares (collectively, Petitioners). Petitioners held their shares through a custodial bank, which was a participant member in a trust company, which held Petitioners’ shares in the name of Cede & Co., which, for purposes of Delaware law, was the holder of record. Cede was constrained to vote Petitioners’ shares as T. Rowe directed and fulfilled its obligation through a chain of authorizations. Although T. Rowe opposed the merger, its voting system generated instructions to vote Petitioners’ shares in favor of it. Ultimately, Cede voted Petitioners’ shares in favor of the merger. Petitioners sought appraisal in favor of the merger. The Court of Chancery held (1) because the holder of record did not dissent as to the shares for which Petitioners sought appraisal, the dissenter requirement was not met of these shares; and (2) therefore, Petitioners’ shares did not qualify for appraisal, and Petitioners remained entitled to the merger consideration without an award of interest. View "In re Appraisal of Dell Inc." on Justia Law