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.
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Delaware Law
Delaware Chancery Court Enjoins Merger Vote Over Disclosure of Investment Bank’s Analyses, Management Projections and Acquiror’s Conversations with Management
By Cleary Gottlieb on
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
Delaware Supreme Court Provides Guidance on Vote Buying, Stock Transfer Restrictions, Removal of Directors and Record Holders
By Cleary Gottlieb on
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