Delaware Insider: Keeping Management in the Game without Tainting the Sale Process


Originally published in Business Law Today - May 2012.

The Court of Chancery has recently restated its skepticism with respect to sales processes that, while overseen by an independent board, may nonetheless be said to have been influenced by senior executives whose personal financial interests could be implicated, even tangentially, by the nature or terms of any resulting business combination. The concept itself is not entirely new, but it appears that in this most recent iteration, a little can go a long way. For example, in In re El Paso Corporation Shareholder Litig., C.A. No. 6949-CS, mem. op. (Del. Ch. Feb. 29, 2012), judicial suspicion was engendered with respect to the objectivity of a sales process where stockholders alleged that the CEO of El Paso Corporation, who had been commissioned by the company’s independent board of directors to head up negotiations for the sale of El Paso to Kinder Morgan, failed to acknowledge to his board his expression of interest in pursuing a post-closing management-led purchase of an El Paso business unit that Kinder Morgan had declared an intention to put up for sale after the proposed merger. No secret deal or method by which the CEO would translate a less than rigorous negotiation of the merger into a discounted price for the asset post-closing was uncovered by plaintiffs. Yet the Court of Chancery found the nascent conflict sufficient to support the conclusion that plaintiffs’ challenge to the fairness of the process would probably succeed at trial.

Please see full article below for more information.

LOADING PDF: If there are any problems, click here to download the file.

Written by:

Published In:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Potter Anderson & Corroon LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.