Page 126 - מיזוגים ורכישות - פרופ' אהוד קמר 2022
P. 126
provisions were not defensive reactions to a perceived threat and no superior proposal
was ever made. Therefore, the court concluded, the decision of the IXC board of directors
to include the "no talk" provision in the merger agreement was entitled to the favorable
presumption afforded under the business judgment rule.
The plaintiff further contended that by including the "no talk" clause in the merger
agreement the IXC board had improperly "willfully blinded itself" in a similar manner to
the Phelps Dodge board of directors. The plaintiff argued that, notwithstanding the fact
that the "no talk" clause had been subsequently revised, it irreparably tainted the sale
process.
The court rejected this notion, stating that "provisions such as [no talk clauses] are
common in merger agreements and do not imply some automatic breach of fiduciary
duty" that cannot be overcome. In an analysis that focused heavily on the specific facts
at hand, the court noted that the "no talk" provisions were not considered until late in
the sale process, after the IXC board had thoroughly surveyed the marketplace for other
potential bidders. This was, in the court’s view, precisely the situation the ACE court
suggested would be a proper use of a "no talk" provision. After denying the plaintiff’s
motion to enjoin the stockholder vote, the IXC/Cincinnati Bell merger proceeded as
planned.
It should be noted that IXC was brought by an unsatisfied stockholder rather than
an actual third-party bidder, as was the case in Phelps Dodge and ACE. It remains unclear
whether the IXC "no talk" provision would have been upheld in the face of a superior offer
regardless of the fact that the provision was introduced late in the negotiating process
after there had been a thorough market check.
Taken together, Phelps Dodge, ACE and IXC hold that while a board of directors
entering into a transaction that does not involve a change of control may unilaterally
decide to ignore subsequent third-party offers, the board of directors has a duty to be
informed in making that decision. A "no talk" provision runs counter to this duty because
it "willfully blinds" a board to other potential opportunities that may arise after the fact.
A board of directors of a Delaware corporation always has a duty to make informed
decisions, and "no talk" provisions, even in strategic non-Revlon transactions, prevent a
board of directors from fully informing itself as to available alternatives. Barring perhaps
the limited fact pattern suggested in ACE, these rulings effectively eliminate the "no talk"
provision from available defensive mechanisms under Delaware law.
Morton A. Pierce is a partner of Dewey Ballantine LLP and chairman of its mergers
and acquisitions group. M. Adel Aslani-Far and Matthew J. Gilroy are associates of the
firm and members of its mergers and acquisitions group. Mr. Pierce and other members
of the firm participated in the transactions described in this article as follows: as counsel
122
was ever made. Therefore, the court concluded, the decision of the IXC board of directors
to include the "no talk" provision in the merger agreement was entitled to the favorable
presumption afforded under the business judgment rule.
The plaintiff further contended that by including the "no talk" clause in the merger
agreement the IXC board had improperly "willfully blinded itself" in a similar manner to
the Phelps Dodge board of directors. The plaintiff argued that, notwithstanding the fact
that the "no talk" clause had been subsequently revised, it irreparably tainted the sale
process.
The court rejected this notion, stating that "provisions such as [no talk clauses] are
common in merger agreements and do not imply some automatic breach of fiduciary
duty" that cannot be overcome. In an analysis that focused heavily on the specific facts
at hand, the court noted that the "no talk" provisions were not considered until late in
the sale process, after the IXC board had thoroughly surveyed the marketplace for other
potential bidders. This was, in the court’s view, precisely the situation the ACE court
suggested would be a proper use of a "no talk" provision. After denying the plaintiff’s
motion to enjoin the stockholder vote, the IXC/Cincinnati Bell merger proceeded as
planned.
It should be noted that IXC was brought by an unsatisfied stockholder rather than
an actual third-party bidder, as was the case in Phelps Dodge and ACE. It remains unclear
whether the IXC "no talk" provision would have been upheld in the face of a superior offer
regardless of the fact that the provision was introduced late in the negotiating process
after there had been a thorough market check.
Taken together, Phelps Dodge, ACE and IXC hold that while a board of directors
entering into a transaction that does not involve a change of control may unilaterally
decide to ignore subsequent third-party offers, the board of directors has a duty to be
informed in making that decision. A "no talk" provision runs counter to this duty because
it "willfully blinds" a board to other potential opportunities that may arise after the fact.
A board of directors of a Delaware corporation always has a duty to make informed
decisions, and "no talk" provisions, even in strategic non-Revlon transactions, prevent a
board of directors from fully informing itself as to available alternatives. Barring perhaps
the limited fact pattern suggested in ACE, these rulings effectively eliminate the "no talk"
provision from available defensive mechanisms under Delaware law.
Morton A. Pierce is a partner of Dewey Ballantine LLP and chairman of its mergers
and acquisitions group. M. Adel Aslani-Far and Matthew J. Gilroy are associates of the
firm and members of its mergers and acquisitions group. Mr. Pierce and other members
of the firm participated in the transactions described in this article as follows: as counsel
122
