Page 122 - מיזוגים ורכישות - פרופ' אהוד קמר תשפב

particular acquiror, to the exclusion of any and all other third-party proposals regardless
of the merits of any such proposal. While some commentators have suggested that the
IXC decision calls into question the impact of Phelps Dodge and ACE, a careful reading of
these decisions makes clear that "no talk" provisions used as deal protection mechanisms
will be upheld only in very limited circumstances.

‘Phelps Dodge’ Case

On July 15, 1999, ASARCO Inc. and Cyprus Amax announced a strategic merger-
of- equals of their two companies, which did not involve a sale of control of either party.
Several weeks later, Phelps Dodge, a competitor of ASARCO and Cyprus Amax,
commenced hostile exchange offers for both ASARCO and Cyprus Amax after friendly
proposals failed.

In connection with its unsolicited offers, Phelps Dodge filed an action in Delaware
Chancery Court challenging, among other things, the "no talk" provision in the
ASARCO/Cyprus Amax merger agreement. That provision prohibited either party from
responding to any third-party proposals and did not include a "fiduciary out.” Phelps
Dodge alleged that the directors of ASARCO and Cyprus Amax breached their duty of care
in approving a merger agreement that included this "no talk" provision. Phelps Dodge
argued that the "no talk" prevented the ASARCO and Cyprus Amax boards of directors
from gathering the necessary information to make judgments in the best interests of their
stockholders.

In its decision, the Delaware Chancery Court pointed out that generally, a board
of directors has no duty to negotiate with any third party concerning a merger if Revlon
duties have not attached. However, the court continued that "even the decision not to
negotiate . . . must be an informed one.” The court explained that "no talk" provisions
"are troubling precisely because they prevent a board from meeting its duty to make an
informed judgment with respect to even considering whether to negotiate with a third
party.”

Here, despite the presence of publicly available information, the "no talk"
provision prohibited either party from engaging in non-public discussions with Phelps
Dodge. The court reasoned that the ASARCO and Cyprus Amax boards had bargained
away their right to become fully informed and to decide whether or not to negotiate with
any third party, including Phelps Dodge, at the time the ASARCO/Cyprus Amax agreement
was executed. By foreclosing the opportunity to become fully informed, the court likened
the action of the ASARCO and Cyprus Amax boards to the "legal equivalent of willful
blindness, a blindness that may constitute a breach of the board[s’] duty of care.”

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