Delaware Chancery Court Upholds Adoption And Use Of Poison Pill Triggered By Competitor’s Acquisition Of Stock

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RE: Selectica, Inc. v. Versata Enterprises, Inc. (C.A. No. 4241-VCN)

On February 26, 2010, the Delaware Court of Chancery issued a post-trial opinion upholding the adoption and use of a poison pill aimed at preserving net operating losses (NOLs)1 of Selectica. This decision updates the guidance and analysis set forth in Moran v. Household Int’l.2 and Unocal Corp. v. Mesa Petroleum Co.3 concerning the adoption and use of defensive measures generally, and in particular the use of poison pills.

While the court stressed the fact-specific limits of its holding, the decision is important for a number of reasons, including that this is the first opinion issued by a Delaware court upholding a modern poison pill that was triggered by a potential acquirer/hostile bidder. The court’s opinion includes a number of important points for companies, including the following...

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