On Friday, in this post-trial opinion, Chancellor Chandler holds that URI cannot compel specific performance of its merger agreement with the RAM entities, which are acquisition subsidiaries for Cerberus. Here are thoughts from the “M&A Law Prof Blog,” “Ideoblog” and the “WSJ.com Law Blog.”
And here is some analysis from Travis Laster: “The Chancellor follows established principles of Delaware law in holding that the merger agreement is ambiguous with respect to the right of specific performance. He finds that URI has proffered a reasonable reading of the agreement in which the right to specific performance is preserved. At the same time, he finds that Cerberus proffered a reasonable reading of the agreement, albeit “barely so,” in which the right to a specific performance remedy was eliminated.
The Chancellor therefore moves to extrinsic evidence. He finds based on the course of drafting and communications between the parties that URI cannot carry its burden of proof to establish its interpretation. He further holds that Cerberus clearly believed that it could walk on the deal for a $100M break fee, that URI knew or should have known that Cerberus had that view but said nothing, and that under the “forthright negotiator principle,” that reading is binding.
Because the Chancellor finds the agreement ambiguous, the opinion is fact heavy. It does not shed light on how MAC clauses will be construed by the Court, and the Chancellor even goes out of his way to caution that the case is not a MAC case, but rather “a good, old fashioned contract case prompted by buyer’s remorse.” The decision will, however, help parties in sharpening their pencils when negotiating specific performance and termination rights.”
URI could have appealed to the Delaware Supreme Court – but decided to take the break up fee instead. Note that the evolution of MAC clause law will be parsed during our upcoming webcast: “MAC Clauses: All the Rage.”