Ropes & Gray LLP updates

Chancery court allows Straight Path stockholders to pursue direct claims against company's former controlling stockholder
Ropes & Gray LLP
  • Corporate Finance/M&A
  • USA
  • 17 October 2018

The Delaware Court of Chancery recently denied a motion to dismiss the claims of Straight Path Communi­cations Inc's stockholders against the company's controlling shareholder. The background of this case involved IDT, which is controlled by its former CEO, Howard Jonas, and was Straight Path's former parent company. When IDT spun out Straight Path, it agreed to indemnify Straight Path for liabilities arising from pre-spin-off conduct.

Delaware courts consider whether minority stockholders are controllers: Oracle and Tesla reviewed
Ropes & Gray LLP
  • Corporate Finance/M&A
  • USA
  • 03 October 2018

Recent decisions in Tesla and Oracle offer new insight into how the Delaware Court of Chancery will evaluate whether, in a conflicted transaction, a minority stockholder is a controller and therefore subject to the elevated entire fairness standard of review. The Tesla litigation arose from Tesla's merger with Solar­City, while in Oracle, stockholders challenged Oracle's acquisition of NetSuite.

New York Supreme Court enjoins Xerox acquisition
Ropes & Gray LLP
  • Corporate Finance/M&A
  • USA
  • 12 September 2018

The Commercial Division of the New York Supreme Court recently enjoined Fujifilm Holdings Corp's proposed acquisition of a controlling interest in Xerox Corp. The court also compelled Xerox to waive provisions of its advance notice bylaw, enabling activist investors to nominate a competing slate of directors after the otherwise applicable deadline. The court's decision has been recognised as precedent-setting New York case law and as a victory for activist shareholders.

No-action letter addresses use of performance record after merger of adviser subsidiaries
Ropes & Gray LLP
  • Corporate Finance/M&A
  • USA
  • 04 July 2018

The Securities and Exchange Commission (SEC) recently issued a no-action letter permitting the post-merger survivor of two wholly owned adviser subsidiaries to use the performance record of the non-surviving adviser in the surviving adviser's advertisements. Critically, in a footnote to the no-action letter, the SEC noted that the "positions expressed in the [Great Lakes and Horizon] no-action letters continue to represent the staff's positions with respect to the circumstances presented therein".

Updated guidance (and ground rules) for controlling stockholder deals
Ropes & Gray LLP
  • Corporate Finance/M&A
  • USA
  • 16 May 2018

While Kahn v M&F Worldwide Corp provided helpful guideposts for avoiding an entire fairness review in controlling stockholder transactions, as with any new doctrine, questions remained as to the judgment's application to different types of deal and negotiation and the consequences of small deviations from strict adherence therein. Recent guidance from the Delaware Court of Chancery has given way to updated ground rules for controlling stockholder transactions.

Company's unaffected market price is best evidence of fair value for appraisal valuations
Ropes & Gray LLP
  • Corporate Finance/M&A
  • USA
  • 14 March 2018

The Delaware Court of Chancery recently held that the best evidence of a company's fair value was its 30-day average unaffected (pre-announcement) market price. The case potentially represents a significant shift in how appraisal cases are decided. It may also be useful in understanding how the Delaware courts will apply two recent Supreme Court judgments which gave significant weight to the deal price as the best measure of fair value where it results from a third-party, arm's-length transaction.

Delaware Supreme Court reverses Court of Chancery's Dell appraisal decision
Ropes & Gray LLP
  • Corporate Finance/M&A
  • USA
  • 17 January 2018

The Delaware Supreme Court recently reversed and remanded the Court of Chancery's valuation of Dell in an appraisal case arising from the 2013 management buyout of Dell by Michael Dell and Silver Lake Partners. The Delaware Supreme Court unanimously held that the Court of Chancery had abused its discretion by failing to give weight to market-based measures of Dell's fair value, including the company's stock price and the deal price.

Chancery court addresses standing to bring fiduciary duty claims following freeze-out merger
Ropes & Gray LLP
  • Corporate Finance/M&A
  • USA
  • 14 June 2017

The Delaware Court of Chancery recently provided new guidance on a stockholder's standing to bring fiduciary duty claims following a freeze-out merger that forced the stockholder to sell its shares. The case involved a complex series of transactions in which General Electric Company (GE) merged with a subsidiary, General Electric Capital Corporation (GECC). As a result of the merger, holders of GECC preferred stock received new shares of GE preferred stock, which were allegedly worth less.

Additional Delaware guidance on avoiding extra-contractual fraud claims in sale transaction
Ropes & Gray LLP
  • Corporate Finance/M&A
  • USA
  • 14 June 2017

In November 2016 the Delaware Court of Chancery issued an opinion that provides additional guidance on how the inclusion of certain key provisions in a purchase agreement can protect a seller against an extra-contractual fraud claim asserted by a buyer in connection with an acquisition transaction. Although the court has noted in the past that there are "no magic words", this case provides helpful guidance on how to minimise the risk of extra-contractual fraud claims in the context of a sale transaction.

Delaware Chancery Court confirms continued applicability of MFW standard
Ropes & Gray LLP
  • Corporate Finance/M&A
  • USA
  • 07 June 2017

The Delaware Court of Chancery has applied the standard established in In re MFW Shareholders Litigation and Kahn v M & F Worldwide Corporation in rejecting a challenge to a controlling stockholder's buyout of the remaining shares of Books-A-Million, Inc from minority stockholders. The court confirmed the framework to be followed by Delaware companies and controlling stockholders that seek to avoid the 'entire fairness' standard of review.

Interested directors may not extinguish breach of fiduciary duty claims through merger
Ropes & Gray LLP
  • Corporate Finance/M&A
  • USA
  • 07 June 2017

Another Delaware Chancery Court decision has confirmed that the extinguishment of claims against directors may be viewed as a material benefit to directors in the transaction context. The court reinforced that even where the entire fairness review applies, to survive a motion to dismiss a plaintiff must initially state a claim that alleges some facts suggesting the transaction in question was unfair – either in process or price.

Delaware Chancery Court dismisses disclosure claims relating to AOL's acquisition of Millennial Media
Ropes & Gray LLP
  • Corporate Finance/M&A
  • USA
  • 31 May 2017

In an action challenging the disclosures issued by Millennial Media in connection with its 2015 acquisition by AOL, the Delaware Court of Chancery held that a claim alleging insufficiency of disclosures and whether they are misleading or incomplete in a way that is material to the stockholders should be pursued pre-closing (and not post-closing).

Three decisions consider effect of stockholder approval on challenged transactions
Ropes & Gray LLP
  • Corporate Finance/M&A
  • USA
  • 24 May 2017

In August 2016 three members of the Delaware Court of Chancery rendered decisions over three consecutive days considering the impact of stockholder votes on challenged corporate transactions. All three cases involved post-transaction claims that board members had breached their fiduciary duties during the deal process, notwithstanding the fact that the transactions at issue had received stockholder approval.

Delaware Chancery Court applies Corwin standard and makes sale subject to business judgement rule
Ropes & Gray LLP
  • Corporate Finance/M&A
  • USA
  • 24 May 2017

In another application of Corwin, the Delaware Court of Chancery recently granted the defendant board members' motion to dismiss an action by former shareholders of OM Group, Inc seeking damages following the closing of the sale of OM Group to Apollo Global Management for $1 billion. The court held that because an overwhelming majority of disinterested stockholders had voted to approve the merger, the business judgement rule applied.

Some courts reject disclosure-only settlements, but New York court adopts different approach
Ropes & Gray LLP
  • Corporate Finance/M&A
  • USA
  • 17 May 2017

The In re Trulia, Inc Stockholder Litigation decision effected a dramatic change in stockholder litigation in Delaware. Two cases – one from the Seventh Circuit Court of Appeals and the other from the New Jersey Superior Court of Union County – may signal growing support for Trulia in courts outside Delaware. More recently, however, the Appellate Division for the First Department of New York reversed a lower court's rejection of a disclosure-only settlement.

Court more likely to equate deal price with fair value following appropriate sales process
Ropes & Gray LLP
  • Corporate Finance/M&A
  • USA
  • 10 May 2017

A Delaware appraisal decision issued during the fourth quarter of 2016 reinforces that the Delaware courts are more likely to give substantial evidentiary weight to the deal price as an indicator of fair value where the transaction was the product of an appropriate arm's-length sales process between two independent parties.

Court again rejects transaction price as best measure of fair value
Ropes & Gray LLP
  • Corporate Finance/M&A
  • USA
  • 10 May 2017

In a post-trial opinion in an appraisal action that arose from the sale of DFC Global Corporation, an international non-bank provider of alternative financial services, to private equity buyer Lone Star Fund VIII (US), LP, Chancellor Bouchard of the Delaware Court of Chancery found that the transaction price is "reliable only when the market conditions leading to the transaction are conducive to achieving a fair price".

Delaware Court of Chancery grants advancement to directors in indemnification dispute
Ropes & Gray LLP
  • Corporate Finance/M&A
  • USA
  • 30 November 2016

The Delaware Court of Chancery recently held that two former directors and officers of an acquired target – one of whom served as a sellers' representative under the merger agreement – were entitled to advancement of fees and expenses in defending themselves against certain claims by the buyer for indemnification for breaches of representations regarding the target's business.

Implementation of amendments to Delaware General Corporation Law
Ropes & Gray LLP
  • Corporate Finance/M&A
  • USA
  • 23 November 2016

House Bill 371 was recently signed into law. It amends the Delaware General Corporation Law with respect to, among other things, appraisal proceedings and intermediate-form mergers. Specifically, the bill limits de minimis appraisal claims, provides surviving corporations with the right to pay stockholders exercising appraisal rights before the Delaware Court of Chancery makes a final value determination and clarifies the requirements and procedures relating to intermediate-form mergers.

District court holds related funds liable for pension fund withdrawal liabilities
Ropes & Gray LLP
  • Corporate Finance/M&A
  • USA
  • 09 November 2016

The US District Court for the District of Massachusetts recently concluded that two private equity funds with the same sponsor, investing together in a distressed portfolio company, can be held liable for pension liabilities incurred by the company under the Employee Retirement Income Security Act, even where the ownership interest in the company of each of the funds, when viewed separately, would have been insufficient to reach that result.

Current search