It is a fundamental thesis of mine that the Delaware Chancery Court is consistently erring in identifying the class of cases in which the so-called Revlon duties attach to that target board of dirfectors. Case in point:
In re Micromet Inc. Shareholders Litigation, C.A. 7197-VCP (February 29, 2012)
This is an excellent primer on what deal protection provisions are acceptable, particularly when the board must have the right to change its recommendation to stockholders when a superior proposal surfaces. It is permissible to require a board to wait a short time before changing its recommendation to allow the first acquiror to match a new proposal. However, once that matching right period passes, the board must be free to act promptly.
This opinion also provides a good analysis of the scope of any pre-deal market check and the board's role in limiting the scope of any effort to shop a deal.
I'm not so sure I'd call the opinion "excellent." Vice Chancellor Parsons asserts that the deal was subject to the Revlon standard of review. The VC's explanation of that holding is terse, at best:
When a corporation "embarks on a transaction-on its own initiative or in response to an unsolicited offer-that will result in a change of control," the primary objective of its directors, as first set forth in ... Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., becomes to maximize the value of the sale of the company for the benefit of its shareholders.
I don't see the change of control here. The acqquiring company is Amgen, Inc., a publicly held corporation.
I beieve that the Delaware Supreme Court has settled on a standard with three triggers:
“The directors of a corporation have the obligation of acting reasonably to seek the transaction offering the best value reasonably available to the stockholders, in at least the following three scenarios: (1) when a corporation initiates an active bidding process seeking to sell itself or to effect a business reorganization involving a clear break-up of the company; (2) where, in response to a bidder’s offer, a target abandons its long-term strategy and seeks an alternative transaction involving the break-up of the company; or (3) when approval of a transaction results in a sale or change of control. In the latter situation, there is no sale or change in control when [c]ontrol of both [companies] remain[s] in a large, fluid, changeable and changing market.” Arnold v. Soc’y for Sav. Bancorp, Inc., 650 A.2d 1270, 1289-90 (Del. 1994) (citations, footnotes, and internal quotation marks omitted).
Outside those three situations, which do not even encompass all corporate control bidding contests, Unocal remained the defining standard.
Let's repeat: "there is no sale or change in control when [c]ontrol of both [companies] remain[s] in a large, fluid, changeable and changing market.” As such, VC Parsons' holding that Revlon had triggered because the transaction contemplated a change of control is clearly erroneous. Because the post-deal combined company would be publicly held, control of that entity will remain "in a large, fluid, changeable and changing market" and, as such, the transaction does not constitute a "change of control" and revlon therefore has not triggered.
As such, the Micromet decision stands as yet another example of what I've elsewhere called "a number of Chancery Court decisions [that] have redrawn Revlon-land’s boundaries in ways that are inconsistent both with the theoretical framework I’ve described herein and Delaware precedents."
