Delaware Chancery Court Considers Whether a Reverse Triangular Merger Constitutes an Assignment by Operation of Law

Sheppard Mullin Richter & Hampton LLP

In Meso Scale Diagnostics, LLC v. Roche Diagnostics GmbH, C.A. No. 5589-VCP (Del. Ch. Apr. 8, 2011), the Delaware Court of Chancery denied a motion to dismiss a breach of contract claim, holding that a reverse triangular merger may constitute an assignment by operation of law. In the first Delaware case to address this issue, the Court found plausible plaintiff’s argument that an assignment “by operation of law” covers mergers that effectively operate like an assignment. The Court held that Delaware’s stock acquisition jurisprudence is not controlling with respect to reverse triangular mergers. In its decision, the Court indicated that the actions a buyer takes after a reverse triangular merger with respect to the target company are relevant to whether an anti-assignment clause is triggered.

In 2007, Roche Holdings Ltd. acquired BioVeris Corporation through a reverse triangular merger whereby a wholly-owned subsidiary of Roche merged with and into BioVeris, with BioVeris as the surviving entity.

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Sheppard Mullin Richter & Hampton LLP

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