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Sarbanes-Oxley News & Developments
The Deal, UnlockedA controversial Supreme Court decision knocks down a tactic for sealing a merger agreement.
> > If there is anything a dealmaker hates, it is uncertainty. But thanks to the controversial Delaware Supreme Court decision in Omnicare Inc. vs NCS HealthCare Inc., more uncertainty in mergers and acquisitions may lie ahead. In a rare 3-2 split decision, Delaware Supreme Court invalidated a merger agreement between NCS and Genesis Health Ventures that was protected by a shareholder lockup. Calling the lockup and other deal-protection devices coercive and preclusive, the court reversed a Delaware Court of Chancery decision that tolerated the lockup - through which Genesis had essentially frozen out the offer from Omnicare for NCS.
Not all lockups are designed to seal a negotiated deal. Stock-option lockups, asset lockups, and breakup fees are types of lockups that let suitors claim a consolation prize it their offers are trumped between the signing of a merger agreement and the shareholder vote. In a shareholder lockup an acquirer secures the backing of large or controllong shareholders prior to the actual vote.
Source: CFO
Published:2003-11-18
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