DealLawyers.com Blog

Here’s some analysis by Kevin Miller of Alston & Bird: In a recent decision – In re Micromet – Delaware Vice Chancellor Parsons denied plaintiffs’ motion to preliminarily enjoin Amgen’s acquisition of Micromet by means of a two-step transaction – an all cash tender offer to be followed by a back end merger at a $11 per share in cash.

Among other things, plaintiffs alleged that the Board breached its fiduciary duties by failing to disclose the fees paid by Micromet to Goldman Sachs over the past two years, as well as Goldman’s interest in Amgen stock and by failing to disclose certain information relating to the financial analyses performed by Goldman Sachs:

“Plaintiffs have made numerous disclosure claims in their Complaint and in the briefing. Having read and considered each of those claims, I find that Plaintiffs have not shown a likelihood of success on any of their disclosure claims.

[. . . ]

Goldman holds approximately $336 million in Amgen stock, most of which it holds on behalf of its clients. Even considering its total position, Goldman’s Amgen holdings equal approximately 0.16% of its overall investment holdings and 3.8% of its healthcare sector investments. Moreover, Goldman owns a substantially larger stake in Company B and a similar stake in another company that was contacted by Goldman as a potential acquirer during the market check.

Furthermore, the Recommendation Statement discloses that Goldman and its affiliates “may at any time make or hold long or short positions and investments, as well as actively trade or effect transactions, in the equity, debt and other securities of both Micromet and Amgen. Given this notice, any investor who desired to know the size of Goldman’s position in Micromet or Amgen as of the last reporting period could find this information in Goldman’s publicly-filed Form 13F. More importantly, Plaintiffs did not present any more detailed evidence from which the Court could reasonably infer that the size and nature of Goldman’s Amgen holdings in this case would be likely to impede its ability effectively and loyally to perform its assignment for Micromet.

As for Plaintiffs’ argument for disclosure of the fees paid to Goldman by the target, Micromet, over the past two years, I note that the Recommendation Statement does disclose Goldman’s contingent interest in the transaction, as well as the fees paid by Amgen to Goldman over the past two years. The Recommendation Statement also discloses that Goldman has performed certain services to Micromet in the past and received compensation for those services. Nevertheless, Plaintiffs claim that this partial disclosure requires supplementation to provide the actual amounts received by Goldman. They fail to provide any persuasive explanation, however, as to why the actual amount of fees paid by Micromet to Goldman would be material to shareholders or to cite any Delaware case law mandating such disclosures. This is not a situation in which Micromet, apart from Amgen, would be a potential source of future business.

[. . .]

Plaintiffs also complain that the Company should have disclosed Goldman’s “Sum of the Parts” discounted cash flow (“DCF”) analysis. The Sum of the Parts analysis was not relied on by Goldman in providing its fairness opinion. There is no dispute that Goldman did prepare such analyses at the request of the Board, buy not all analyses produced by financial advisors and given to the board are required to be disclosed under Delaware law. Instead, “[i]n Delaware only that information that is material must be disclosed.”

Here, the total value range reported under the Sum of the Parts analysis was $7.74 to $10.42 and the ex-corporate valuation range, which excluded the costs of running Micromet, was $8.92 to $11.60. Although the high-end of the ex-corporate range under this Sum of the Parts DCF analysis is slightly higher than the high-end of Goldman’s DCF analysis, the latter analysis yielded a substantially similar valuation range of $7.09 to $11.44. Therefore, I find it unlikely that disclosure of the Sum of the Parts DCF analysis materially would have altered the total mix of information available to shareholders. Accordingly, it did not need to be disclosed.

[. . . ]

Finally, Plaintiffs’ claim regarding Goldman’s use of an historical Ibbotson equity risk premium, rather than a supply-side equity risk premium, is not a disclosure claim. Instead, it is a challenge to the methodology employed by Goldman in conducting its illustrative DCF analysis. Under Delaware law, “a complaint about the accuracy or methodology of a financial advisor’s report is not a disclosure claim.” Plaintiffs claim amounts to nothing more than a “quibble with a financial advisor’s work” arguing that Goldman applied an inappropriate equity risk premium in its analysis This does not state a valid disclosure claim.”

The opinion is worth a close reading as it contains lots of additional guidance on a number of current issues relating to process and other disclosure claims.