Page 123 - מיזוגים ורכישות - פרופ' אהוד קמר תשפב

The court denied Phelps Dodge’s motion for a preliminary injunction, however,
holding that plaintiff’s alleged irreparable harm — that it would walk away after a merger
of Cyprus Amax and ASARCO is consummated — was a "self-inflicted harm.” Although
the court did not grant the preliminary injunction on these grounds, it did provide support
for Phelps Dodge’s position, stating that Phelps Dodge had demonstrated a reasonable
probability of success on the merits.

After the Delaware Chancery Court’s decision, ASARCO and Cyprus Amax
postponed their respective stockholder meetings relating to their merger and agreed to
a one-week cooling-off period in order to explore alternate strategic options. Shortly
thereafter, Phelps Dodge executed merger agreements to acquire both Cyprus Amax and
ASARCO. The Phelps Dodge/Cyprus Amax merger was consummated as planned.
However, the Phelps Dodge/ASARCO merger agreement was ultimately terminated after
ASARCO received a subsequent superior proposal from Grupo Mexico, S.A. de C.V.

‘ACE Limited v. Capital Re’

Several weeks after the Phelps Dodge decision, the Delaware Chancery Court
reviewed a restrictive "no shop" provision in a merger agreement between ACE and
Capital Re. On June 10, 1999, ACE and Capital Re entered into a $17 per share, stock-for-
stock merger agreement that included a provision prohibiting Capital Re from "solicit[ing],
initiat[ing], encourag[ing], . . . [or] tak[ing] any action knowingly to facilitate the
submission of any inquiries, proposals, or offers . . . from any person.” In order to
negotiate with third parties, the agreement required, among other things, that Capital Re
"conclude in good faith . . . based upon the written advice of its outside counsel, that
participating in such negotiations or discussions or furnishing such information is required
in order to prevent the Board of Directors of [Capital Re] from breaching its fiduciary
duties to its stockholders.”

After the merger was announced, ACE’s stock price fell substantially, making its
offer worth only $10 per share. On Oct. 6, 1999, the day before the Capital Re
stockholders were to vote on the ACE/Capital Re merger, Capital Re received an
unsolicited offer from XL Capital Limited for $12.50 per share in cash.

At an emergency meeting of the Capital Re board of directors to discuss
terminating the ACE/Capital Re merger agreement, the board received a written opinion
from outside legal counsel that entering into discussions with XL Capital was "consistent
with" the board’s fiduciary duties. Although the written advice did not say that the board
of directors was "required" to discuss the XL Capital offer in order to satisfy its fiduciary
duties, outside counsel gave oral advice to the board which indicated that consideration
of the XL Capital offer was "required" if the board concluded that the XL Capital offer
would be reasonably likely to result in a superior offer.

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