The Delaware Court of Chancery has again confirmed that it will not entertain lawsuits that seek to second-guess a board of directors’ good-faith decision to accept one acquisition proposal over another as long as a majority of the board is unaffected by conflicts or the influence of a controlling stockholder. In a recent opinion—In re Essendant Shareholder Litigation, C.A. No. 2018-0789-JRS—the court held that Essendant’s directors did not breach their fiduciary duties by choosing to accept an all-cash offer over an already accepted stock deal, even though it was alleged that the rejected stock deal provided more value to Essendant stockholders. The decision reinforces Delaware’s strong policy of protecting and promoting the role of the board of directors as the ultimate manager of the corporation as well as Delaware law’s reluctance to displace or interfere with good-faith directorial decisions.
Background
In 2018, Essendant, an office supply company, signed a merger agreement with Genuine Parts Co., an automotive and industrial parts company. As part of the contemplated transaction, Essendant was to merge with a spun-off subsidiary of Genuine Parts, and Essendant stockholders were to receive a 49% ownership stake in the combined entity in exchange for their shares of Essendant. According to Essendant’s financial advisers, the transaction was valued at $13.30-$23.90 per share, with $8.35-$11.25 attributed to synergies. The merger agreement contained a no-shop clause, but permitted Essendant’s board to consider unsolicited offers. It also provided for a $12 million termination fee to be paid to Genuine Parts if terminated.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]