Page 89 - מיזוגים ורכישת חברות - ברקלי תשפא

Additionally, C & J stockholders have the opportunity to vote, on a non‐binding,
advisory basis, on the compensation proposals for C & J executives as part of the same
proxy as the binding vote to approve the merger agreement. And the employment
agreement Comstock negotiated is not binding on the board of New C & J, which must
approve any compensation package. Most important of all, any potential conflict must be
balanced against the numerous meetings that the C & J board held during the process,
the board’s close involvement and communications with Comstock throughout, and the
reality that the board’s favorable view of the transaction was validated by the stock
market reaction.

Likewise, the plaintiffs’ argument that the board lacked awareness of the change
in control implications of the deal is belied by the protective provisions built into the
merger agreement. That agreement not only ensured that C & J stockholders would share
pro rata in any future control premium if New C & J is sold, but also contained an unusual
buy‐side "fiduciary out" allowing for a lengthy and viable post‐signing market check.

It is therefore unsurprising that the Court of Chancery was unable to find a
reasonable probability of success on the merits or that any member of the board was
conflicted. Although the record before us reveals a board process that sometimes fell
short of ideal, Revlon requires us to examine whether a board’s overall course of action
was reasonable under the circumstances as a good faith attempt to secure the highest
value reasonably attainable. When that standard is applied to this record, we cannot
conclude that the plaintiffs have proven that the majority‐independent C & J board acted
unreasonably in negotiating a logical strategic transaction, with undisputed business and
tax advantages, simply because that transaction had change of control implications.

***

1. The Court of Chancery’s Ruling Rested on an Erroneous Understanding of What
Revlon Requires of a Board of Directors

Not only did the Court of Chancery fail to apply the appropriate standard of
review, its ruling rested on an erroneous understanding of what Revlon requires. Revlon
involved a decision by a board of directors to chill the emergence of a higher offer from a
bidder because the board’s CEO disliked the new bidder, after the target board had
agreed to sell the company for cash. Revlon made clear that when a board engages in a
change of control transaction, it must not take actions inconsistent with achieving the
highest immediate value reasonably attainable.

But Revlon does not require a board to set aside its own view of what is best for
the corporation’s stockholders and run an auction whenever the board approves a change

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