Creeping Takeovers and Fiduciary Duties – A Recap

In In re Sirius XM Shareholder Litigation, Delaware Chancellor Strine dismissed a complaint that the Sirius board had breached its fiduciary duties by adhering to the provisions of an investment agreement with Liberty Media that precluded the Sirius board from blocking Liberty Media’s acquisition of majority control of Sirius through open-market purchases made by Liberty Media following a three-year standstill period. By holding the complaint to be time-barred under the equitable doctrine of laches the Delaware court did not address the merits of whether the Sirius board breached its fiduciary duties. However, In re Sirius still offers the opportunity to recap the guidance on “creeping takeovers” that can be derived from existing Delaware case law:

..In re Sirius confirms that there are no particular actions that a board must take to prevent creeping takeovers through open-market purchases. The board’s conduct will be reviewed in its entirety, and it is unlikely that Delaware courts will find a breach of fiduciary duties when there is a valid reason for the board’s decision not to adopt defensive actions...

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