Editor’s Note: Jack B. Jacobs
is Senior Counsel at Sidley Austin LLP, . The following post is based on a Sidley update, and is part of the Delaware law series
, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here
The volume of Court of Chancery decisions has been proceeding apace. We have culled out two that we believe are worthy of your attention:
Cigna Health & Life Ins. Co. v. Audax Health Solutions, 2014 WL 6784491 (Del. Ch.).
This is a “must read” for all M&A and Private Equity practitioners and professionals, given the use of certain of the deal devices found to be invalid in the specific circumstances of this case.
Cigna, a large stockholder of Audax, the acquired company, sued to invalidate certain conditions of an arm’s length negotiated cash-out merger of Audax into United. Essentially, the defendant merging corporations conditioned receipt of the merger consideration not only upon surrender of the (to-be-cancelled) shares, but also upon the execution of a Letter of Transmittal, wherein each surrendering stockholder agreed to the “Obligations” set forth therein. Cigna refused to execute a Letter of Transmittal, and in response the defendants refused to pay Cigna the merger consideration. Cigna sued in the Court of Chancery for a judgment declaring the Obligations invalid and mandating payment of the merger consideration to Cigna. The Court of Chancery (V.C. Parsons) held the obligations invalid under 8 Del. C. §251 and (relatedly) for lack of consideration.
…continue reading: A Strong Cautionary Note for M&A Practitioners and Professionals