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Following the SEC’s decision not to seek a rehearing of the decision by the U.S. Court of Appeals for the District of Columbia Circuit vacating its “proxy access” rule (Rule 14a-11 under the Securities Exchange Act of 1934), the stay on the companion “private ordering” amendments to Rule 14a-8 was lifted and those amendments are now in effect. Companies can no longer exclude otherwise-qualifying shareholder proposals seeking to establish a procedure in a company’s governing documents to permit shareholder nominees to be included in the company’s future proxy statements. As with other shareholder proposals, in order to make an access proposal a shareholder need only own $2,000 of company stock and have held it continuously for one year.
Continue Reading Preparing for “Proxy Access” Shareholder Proposals

In In re Del Monte Foods Company Shareholders Litigation,* Vice Chancellor Travis Laster preliminarily enjoined a shareholder vote on an acquisition of Del Monte Foods by a group of private equity firms based on a preliminary finding that the sales process was tainted by the misconduct of the company’s investment banker, with the knowing participation of the buyers.  While the company had already mooted the plaintiffs’ disclosure claims through a supplemental proxy statement, the court delayed the vote for a period of 20 days, during which time the “no shop”, break-up fee and matching right provisions of the merger agreement would not apply, in order to enable competing bidders to make proposals.
Continue Reading Lessons of Del Monte Foods For Companies Running (or Considering) a Sale Process

  • Reduced Uncertainty for Top-Up Options (Christopher E. Austin)
  • Airgas v. Air Products: Delaware’s Supreme Court on the Meaning of Meaning (Daniel S. Sternberg)
  • Tips for PE Firms Participating in Stalking Horse Auctions (Neil Whoriskey)
  • A Reasonable Path: Delaware Chancery Court Confirms Board’s Right to Select the Path to Value Maximization under Revlon 

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Shareholder proposals advocating that corporations provide shareholders with the right to act by written consent in lieu of a meeting reappeared on ballots this proxy season after a hiatus of several years and have won average shareholder support of over 54%. While these proposals are nonbinding and the number of companies with such proposals on the ballot in 2010 is relatively small – a total of 16 companies, according to RiskMetrics – the level of shareholder support is striking and will likely encourage proponents to advance proposals at more companies next year.
Continue Reading Action by Written Consent: A New Focus for Shareholder Activism

In a May 25, 2010 decision, In re CNX Gas Corporation Shareholders Litigation, the Delaware Chancery Court raised the bar for controlling stockholders seeking to acquire a controlled subsidiary.  Examining a two-step transaction (a unilateral tender offer followed by a short-form merger), the court held that the claims against controlling stockholders in connection with such acquisitions will be entitled to review under the deferential business judgment rule (as opposed to the stricter “entire fairness” standard) only if the offer both (1) is affirmatively recommended by an independent special committee that has been delegated full authority of the board with respect to the offer and (2) contains a satisfactory “majority-of-the-minority” condition.  Contrary to long-standing Delaware Supreme Court precedent, the court also stated that, if these standards were satisfied, a going private transaction structured by a controlling stockholder as a long-form merger should also be subject to review under the business judgment rule.  The decision has important implications for controlling stockholders and their advisors in structuring and carrying out going private transactions.
Continue Reading Delaware Court of Chancery Revisits Standard for Going Private Transactions with Controlling Stockholders

On May 13, 2010, in Maric Capital Master Fund, Ltd. v. PLATO Learning, Inc., Vice Chancellor Strine preliminarily enjoined the acquisition of PLATO Learning by Thoma Bravo LLC on the basis of misleading disclosures in PLATO’s proxy statement.  The opinion provides guidance on Delaware’s requirements for merger proxy disclosure regarding management projections, financial advisors’ analyses and contacts between the acquiror and target management.
Continue Reading Delaware Chancery Court Enjoins Merger Vote Over Disclosure of Investment Bank’s Analyses, Management Projections and Acquiror’s Conversations with Management

On April 21, 2010, in Crown Emak Partners, LLC v. Kurz, the Delaware Supreme Court issued a wide-ranging opinion providing guidance regarding buying votes from stockholders, contractual restrictions on the transfer of stock, removal of directors and who is a record holder entitled to vote and deliver consents in respect of shares.  The opinion is of interest to general counsels, corporate secretaries, participants in control contests and those involved in arrangements that may separate the voting and economic rights of an equity security.
Continue Reading Delaware Supreme Court Provides Guidance on Vote Buying, Stock Transfer Restrictions, Removal of Directors and Record Holders