Page 130 - מיזוגים ורכישות - פרופ' אהוד קמר 2022
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its ongoing fiduciary responsibilities, and that the board was "required to contract for an
effective fiduciary out clause to exercise its continuing fiduciary responsibilities."
Dissenting Views
In a vigorous dissenting opinion, Chief Justice Veasey and Justice Steele called the
majority rule "clearly erroneous" because it failed to "respect the reasoned judgment of
the board of directors and give effect to the wishes of the controlling stockholders.” The
dissenters noted that there could be circumstances when business realities demand a
lock-up to permit wealth-enhancing transactions to go forward.
The dissenters, concerned that the majority’s bright-line prohibition against
absolute lock-ups would deter bidders who were willing to bid only with solid deal
protection, expressed the hope that the decision will be interpreted narrowly. In a
separate dissent, Justice Steele said he would not "shame" the NCS board, which he found
to have acted "in accordance with every fine instinct that we wish to encourage."
Where Do We Go From Here?
Despite the hopes of the dissenters, the broad language of Omnicare v. NCS does
not appear to leave much room for a Delaware target company to be able to grant
absolute deal certainty to a bidder. However, we offer the following observations:
Less is more. The NCS/Genesis lock-up provided mathematical certainty that the
deal would be approved. However, it should be possible for a target board to approve
lock-up agreements with stockholders owning something less than a majority of the
voting stock, or perhaps covering only a portion of a majority stockholder’s shares. It may
also be permissible for the large stockholders to agree to give up to the first bidder much
of the upside from a sale to a later higher bidder. Such a provision is not a lock-up — but
it certainly lessens the motivation of the large stockholders to entertain a competing bid.
Stockholders don’t have director duties. It may be possible to structure a fully
locked-up transaction that avoids a requirement for target board action by coupling a
bidder’s tender offer with a commitment by majority stockholders to tender into the
offer. Of course, that won’t work if board action is otherwise required — e.g., to amend
a poison pill or approve a transaction for purposes of a business combination statute —
and the bidder must be willing to proceed without the benefit of representations and
warranties in a merger agreement with the target.
An early vote. Another possibility, if the target’s stockholders can act by written
consent, is to have the deal approved by the stockholders up front, since stockholder
approval should extinguish the board’s fiduciary duty to be able to entertain a superior
bid. However, note that Exchange Act rule 14c-2(b) requires a target company to send
126
effective fiduciary out clause to exercise its continuing fiduciary responsibilities."
Dissenting Views
In a vigorous dissenting opinion, Chief Justice Veasey and Justice Steele called the
majority rule "clearly erroneous" because it failed to "respect the reasoned judgment of
the board of directors and give effect to the wishes of the controlling stockholders.” The
dissenters noted that there could be circumstances when business realities demand a
lock-up to permit wealth-enhancing transactions to go forward.
The dissenters, concerned that the majority’s bright-line prohibition against
absolute lock-ups would deter bidders who were willing to bid only with solid deal
protection, expressed the hope that the decision will be interpreted narrowly. In a
separate dissent, Justice Steele said he would not "shame" the NCS board, which he found
to have acted "in accordance with every fine instinct that we wish to encourage."
Where Do We Go From Here?
Despite the hopes of the dissenters, the broad language of Omnicare v. NCS does
not appear to leave much room for a Delaware target company to be able to grant
absolute deal certainty to a bidder. However, we offer the following observations:
Less is more. The NCS/Genesis lock-up provided mathematical certainty that the
deal would be approved. However, it should be possible for a target board to approve
lock-up agreements with stockholders owning something less than a majority of the
voting stock, or perhaps covering only a portion of a majority stockholder’s shares. It may
also be permissible for the large stockholders to agree to give up to the first bidder much
of the upside from a sale to a later higher bidder. Such a provision is not a lock-up — but
it certainly lessens the motivation of the large stockholders to entertain a competing bid.
Stockholders don’t have director duties. It may be possible to structure a fully
locked-up transaction that avoids a requirement for target board action by coupling a
bidder’s tender offer with a commitment by majority stockholders to tender into the
offer. Of course, that won’t work if board action is otherwise required — e.g., to amend
a poison pill or approve a transaction for purposes of a business combination statute —
and the bidder must be willing to proceed without the benefit of representations and
warranties in a merger agreement with the target.
An early vote. Another possibility, if the target’s stockholders can act by written
consent, is to have the deal approved by the stockholders up front, since stockholder
approval should extinguish the board’s fiduciary duty to be able to entertain a superior
bid. However, note that Exchange Act rule 14c-2(b) requires a target company to send
126
