February 2011

Here’s the Davis Polk memo we released today concerning the Chancery Court’s refusal to order dismantling of the Airgas poison pill.  What’s instructive about the case, I think, is not that it creates new law (it doesn't) but that it underscores the importance of a detailed process and documented strategic thinking.  I've heard some directors already say that it vindicates a “just say no” approach, but I think this paints with too broad a brush.  As usual, the Chancery Court’s analysis here is highly fact-specific and grounded in the court’s intuitive sense that the directors here really were acting in good faith.  It certainly helped, by the way, that the directors that Airgas itself had nominated to the board were aligned with the balance of the board.

Contact Bill Kelly.

Here’s our newsflash on the Chancery Court’s much publicized opinion enjoining the Del Monte buyout vote and deal protections due to alleged financial advisor conflicts and misconduct.  Even though Vice Chancellor Laster found that the board appeared to have acted in good faith, he ultimately holds the board responsible for oversight failures and finds that the sponsors probably “aided and abetted” the financial advisor’s misconduct.  Although this case does not create new law (like the earlier TOYS “R” US decision, it clearly admits of the permissibility of a target financial advisor participating in buy-side financing, in the appropriate circumstances), I think it highlights the importance of target boards evaluating the risk/benefit calculus and implementing appropriate procedures when deciding to permit their financial advisor to participate in buy-side financing.

Contact Phillip Mills.