Delaware Court of Chancery Denies Injunctive Relief, Instructs on Deal Protection Provisions and Disclosure of Projections


In re: Orchid Cellmark Inc. Shareholder Litigation, May 12, 2011

In a letter opinion issued on May 12, 2011, the Delaware Court of Chancery declined to extend preliminary injunctive relief to plaintiff shareholders objecting to Laboratory Corporation of America Holdings, Inc.'s (LabCorp) acquisition of Orchid Cellmark Inc. (Orchid). In denying the plaintiffs' request for injunctive relief, the Court reviewed two important areas of corporate M & A law and practice: the permissibility of deal protection mechanisms and the adequacy of projection disclosures made to shareholders in connection with a tender offer.

The plaintiffs sought to enjoin the $85.4 million transaction on two general grounds: (1) claims that the approval of the transaction by Orchid's Board of Directors (the Board) was based on a flawed and inadequate decision-making process that failed to reasonably maximize shareholder value, and (2) claims that Orchid's shareholders were provided with materially misleading and incomplete disclosures in connection with the transaction.

The Court determined that the plaintiffs failed to demonstrate a reasonable probability of success on the merits under each claim. In rejecting the plaintiffs' first claim, the Court concluded the information relied upon by the Board in the decision-making process was adequate, and the Board's decisions to approve the merger agreement and the deal protection measures the agreement included were reasonable. Similarly, the Court concluded the plaintiffs fell short of their burden with respect to the disclosure claim because the information disclosed to shareholders by the Board was accurate and sufficient.

Please see full alert below for more information.

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

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.

© Reed Smith | Attorney Advertising

Written by:


Reed Smith on:

Popular Topics
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*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. Or, sign up using your email address.