Rise of IntercontinentalExchange and Implications of its Merger with NYSE Euronext

The following comes to us from Latoya C. Brown, a practicing attorney in Florida and a former intern at the US Securities & Exchange Commission. The views expressed herein are those of the author and not necessarily those of the Commission.

On November 8, 2013, NYSE Euronext (“NYSE”) announced the timeline for the completion of its acquisition by IntercontinentalExchange (“ICE”).  As discussed in my recent article, Rise of IntercontinentalExchange and Implications of its Merger with NYSE Euronext, the combination of these two companies exemplifies a trend toward the creation of mega-exchanges that permit electronic trading of broad groups of … Read more

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The Dwindling of Revlon

In this blog post, I trace why my co-author Rob Ricca and I have concluded that the landmark 1986 Revlon ruling is, today, an insipid and remedially insignificant doctrine.  Its overly exalted place in M&A law endures because it is wrongly regarded in narrow, silo-like doctrinal isolation, even though it can only be understood as one part of a legal landscape that has dramatically changed since the mid-1980s.

The iconic Revlon doctrine has been an assumed, accepted, and integral part of M&A law for almost three decades.  In Revlon, the Delaware Supreme Court ruled that, in a corporate break-up sale, … Read more

Delaware Court Confirms High Bar To Escape Deal

The following post is based on a memo originally published by Cadwalader, Wickersham & Taft LLP on November 14, 2013 which can be found here.

Two recent Delaware Chancery Court opinions, issued on October 25 and November 9, 2013, illustrate the high bar that buyers and sellers must clear to escape an unfavorable deal or obtain a  court order requiring a deal to close.


In June 2013, Apollo Tyres agreed to acquire Cooper Tire & Rubber Co. for $35 per share in a  $2.5 billion transaction. Within weeks, commentators have suggested, buyer’s remorse set in. In  July, Apollo’s … Read more

The Underappreciated Importance of Personal Jurisdiction in Delaware’s Success

In an article to be published this Spring in the DePaul Law Review, I argue that Delaware’s position as the center of corporate litigation has been rooted in two unique but unconstitutional approaches to personal jurisdiction over fiduciaries. Until Delaware addresses serious problems with its personal jurisdiction statute, its other attempts to retain caseflow will ultimately be ineffective.

It is no secret that the Court of Chancery judges are worried and angry. The lifeblood of that court, stockholder litigation, is migrating out of Delaware to other states. If Delaware continues to lose caseflow, it risks losing its dominance in corporate … Read more

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Editor's Tweet: Eric Chiapinelli on The Underappreciated Importance of Personal Jurisdiction in Delaware’s Success http://wp.me/p2Xx5U-1EE

Independent Directors as a Handy Political Tool

Boards of public corporations have more independent directors than ever before. Sixty percent of boards of S&P 500 companies are not only majority independent, but have a single insider on the board: the CEO. While Jamie Dimon is still CEO as well as chair of J.P. Morgan’s board, despite attempts to unseat him, this is becoming increasingly rare. Over the last 15 years, the percentage of S&P 500 firms with separated positions has risen from 16% to 45%.

Director independence has been pushed by institutional investors, exchanges, and also government regulators. The push for independence has continued despite, at best, … Read more

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Wachtell discusses Delaware Chancery Court’s Holding that Control over All Privileged Communications Passes to the Surviving Corporation in a Merger

Last week, the Delaware Court of Chancery ruled that an acquiring merger party obtains legal control of all of a target’s attorney-client communications, absent an express provision in a merger agreement to the contrary.  Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, C.A. No. 7906-CS (Del. Ch. Nov. 15, 2013).  In so ordering, the Delaware court declined to follow a decision of the New York Court of Appeals, Tekni-Plex, Inc. v. Meyner & Landis, 89 N.Y.2d 123 (1996), which held that a selling party retains control of those privileged pre-merger communications that … Read more

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Willful Blindness as Boardroom “Bad Faith”

The recent increase in the frequency and success with which “willful blindness” theories have been asserted in litigation may have long term implications for the corporate director’s liability profile.

Willful blindness is an aggressive liability theory that seeks to expand the definition of “knowledge” to include situations in which institutions or individuals “turn a blind eye” when there is a high probability that a particular, troubling, fact or circumstance exists.  Assessing   willful blindness involves a highly subjective analysis, and can be especially troublesome for defendants in cases where bad facts, and real harm, may be present.  As such, it is … Read more

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Editor's Tweet: McDermott Will & Emery's Michael Peregrine on Willful Blindness as Boardroom “Bad Faith” http://wp.me/p2Xx5U-1xF

Empiricism and Experience; Activism and Short-Termism; the Real World of Business

Harvard Law School Professor Lucian Bebchuk believes that shareholders should be able to control the material decisions of the companies they invest in.  Over the years, he has written numerous articles expressing this view, including a 2005 article urging that shareholders should have the power to initiate a shareholder referendum on material corporate business decisions.  In addition to his writings and speeches, Prof. Bebchuk has established and directs the Shareholder Rights Project at Harvard Law School for the purpose of managing efforts to dismantle classified boards and do away with other charter or bylaw provisions that restrain or moderate shareholder … Read more

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Editor's Tweet: Wachtell Marty Lipton on Empiricism and Experience; Activism and Short-Termism; the Real World of Business

Death of the Top-Up Option in Two-Step Transactions

James Matarese and Danielle Lauzon are M&A partners at Goodwin Procter LLP whose practices focus on technology and life sciences companies. Their recent representations include Onyx Pharmaceuticals in its merger with Amgen in a transaction valued at $10.4 billion.  

On October 1, 2013, Amgen Inc. (“Amgen”) announced the completion of its acquisition of Onyx Pharmaceuticals, Inc. (“Onyx”).  The transaction was structured as a two-step acquisition – a tender offer by Arena Acquisition Company (the “Purchaser”), a Delaware corporation and wholly-owned subsidiary of Amgen, for all outstanding shares of Onyx, followed by a “back-end” merger of the Purchaser with and into … Read more

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The Government Shutdown Could Affect Your Transaction

The US antitrust authorities will cease certain of their operations during the pending government shutdown and your transaction may be affected.

The US antitrust agencies receive an average of 25 Hart-Scott-Rodino (HSR) filings per week. During the current government shutdown, the Federal Trade Commission (“FTC”) and Antitrust Division of the Department of Justice (“Antitrust Division”) have indicated they will continue to accept HSR filings, and the FTC’s Premerger Notification Office will be open but with a very limited staff. We see three consequences that transacting parties should take into consideration:

First, given the limited staff likely to be on hand … Read more

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Editor's Tweet: Clifford Chance's Tim Cornell on The Government Shutdown Could Affect Your Transaction

Greenberg Traurig Summarizes the 2013 Amendments to the Delaware General Corporation Law

Recently, the Delaware legislature adopted and Delaware’s Governor signed into law several substantive amendments to the General Corporation Law of the State of Delaware (the DGCL), 8 Del. C. §§ 101 et seq.

New Provisions

Ratification of Defective Corporate Acts, Transactions and Stock (§§ 204 and 205) → These new Sections provide a procedure to ratify defective corporate acts, transactions and stock and vest the Court of Chancery of the State of Delaware (the Court of Chancery) with jurisdiction over disputes regarding such ratification, the validity of any corporate act, transaction or stock and the modification or waiver of … Read more

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Sullivan & Cromwell discusses Shuanghui International’s CFIUS Clearance for its Purchase of Smithfield Foods

Shuanghui International Holdings Limited (“Shuanghui”) and Smithfield Foods, Inc. (“Smithfield”) announced on Friday that the companies have received notice from the Committee on Foreign Investment in the United States (“CFIUS”) that its national security review of the proposed acquisition by Shuanghui of Smithfield is complete. Although the CFIUS process has concluded, the acquisition, which would be the largest acquisition of a U.S. company by a Chinese investor to date, remains subject to other conditions to closing, including the approval of Smithfield shareholders.

Shuanghui, a Hong Kong-based company that owns a variety of businesses in the food and logistics sectors, including

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What to Do When an Activist Comes Knocking

The following comes to us from Charles M. Nathan, Partner and Head of Corporate Governance Practice at RLM Finsbury.

Activist investors are currently the darlings of the equity markets and the financial media.  Many of the leading activist investors (Bill Ackman, Dan Loeb, Nelson Peltz and Carl Icahn, to name a few) appear regularly on business news channels, have their investment forays avidly covered by the media and are literally household names.  In part due to (mostly fawning) press coverage and a perceived track record of success, activist investing has emerged as a well-recognized and growing alternative asset class, … Read more

The Going-Private Freeze-Out: A Unique Danger for Investors in Publicly Traded Delaware LPs and LLCs

The following post comes to us from Brent J. Horton, assistant professor at Fordham University Gabelli School of Business.

In my recent article, The Going-Private Freeze-Out: A Unique Danger for Investors in Delaware Non-Corporate Business Associations,[1] I examine the agreements of 86 publicly traded, non-corporate business associations (i.e., limited partnerships (“LPs”) and limited liability companies (LLCs)) for provisions that modify the fiduciary duties of management in the context of going-private freeze-outs.

One danger of investing in a public company—whether in the corporate or non-corporate context—is the going-private freeze-out.  In such a transaction, public ownership is eliminated—“cashed-out”—and … Read more

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Editor's Tweet: The Going-Private Freeze-Out: A Unique Danger for Investors in Publicly Traded Delaware LPs and LLCs

Credit Risk Retention: Agencies Propose Revised Rule

The following is a joint press release from six federal agencies on the revised credit risk retention rule, available here.

Six federal agencies on Wednesday issued a notice revising a proposed rule requiring sponsors of securitization transactions to retain risk in those transactions. The new proposal revises a proposed rule the agencies issued in 2011 to implement the risk retention requirement in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

This proposal is being issued jointly by the Board of Governors of the Federal Reserve System, the Department of Housing and Urban Development, the Federal Deposit … Read more

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The Geography of Revlon-Land in Cash and Mixed Consideration Transactions: A Response to Professor Bainbridge

The following comes to us from Mohsen Manesh, an Assistant Professor at the University of Oregon School of Law.

In the recently published The Geography of Revlon-Land,[1] Professor Stephen Bainbridge attempts to crisply delineate the boundaries and contours of the evolving doctrine first articulated by the Delaware Supreme Court in Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc.[2]— or Revlon-land, more colloquially. The Revlon doctrine famously dictates that in certain transactions involving the “sale or change in control” of a corporation, the corporation’s board of directors has a duty to “get[] the … Read more

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Editor's Tweet: Prof. Manesh of Oregon Law Respond to Bainbridge on Revlon-Land

The Marketplace of Ideas: Rethinking the Disclosure of Beneficial Ownership under Section 13(d)

The CLS Blue Sky Blog presents the third installment of our series,  “The Marketplace of Ideas.”  Earlier installments are available here and here.  The intent is to present different perspectives on the same subject by two or more authors.

Today, the subject is how the SEC should respond to Dodd Frank’s invitation to rethink the disclosure of beneficial ownership under Section 13(d).  We have asked a number of experts for their views.

Our first release, Proposals to “Reform” the Section 13D Rules:  Getting it Precisely Backwards, comes to us from Professors Ronald J. Gilson of Columbia and Stanford … Read more

Proposals to “Reform” the Section 13D Rules: Getting it Precisely Backwards

The current proposals to accelerate the timing of beneficial ownership disclosure under Section 13(d) of the 1934 Securities Exchange Act and to broaden the definition of beneficial ownership to include derivative positions that provide economic exposure to stock price movement but not a right to vote or acquire stock, gets the problem precisely backwards.  The mismatch of problem and solution is apparent when we focus on two dates:  1968, when the Williams Act adding Section 13 was adopted, and 2010, when Section 766 of the Dodd-Frank legislation gave the SEC the authority, but not the obligation, to consider whether derivative … Read more

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Editor's Tweet: Profs. Gilson and Gordon on Proposals to “Reform” the Section 13D Rules: Getting it Precisely Backwards

Disclosure Is Still the Best Policeman!

In a delightful essay, Ron Gilson and Jeff Gordon remind us that the times have changed and the Williams Act belongs in their view to the era of the Beatles. (Personally, I have trouble believing that Sgt. Pepper was really that long ago.  Next, they will try to tell me that John Lennon is dead).  Even if they are right, I must respond with a counter-truism.  Plus ca change, plus la meme chose.  And I will raise their bid, by invoking two other familiar maxims:  First, power corrupts, and absolute power is at least within view for institutional … Read more

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Editor's Tweet: John Coffee on why Disclosure Is Still the Best Policeman in the 13(d) Debate

Sullivan & Cromwell discusses SIGA Technologies, Inc. v. Pharmathene, Inc.

In an opinion issued on May 24, 2013,[1] the Delaware Supreme Court reaffirmed that an express contractual obligation to negotiate an agreement in good faith is enforceable and held that expectation damages[2] are available for breach of that obligation if the court is reasonably certain that the contracting parties would have reached an agreement but for the defendant’s bad faith, assuming the damages can be ascertained with reasonable certainty. The case serves as a useful reminder that care should be taken in drafting term sheets or other preliminary documents and that obligations to negotiate in good faith should be taken

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Editor's Tweet: Delaware Reaffirms Express Obligation to Negotiate Agreement in Good Faith Is Enforceable and Holds Expectation Damages Are Available