September 5, 2008

What is the Timetable to Assert a MAE?

From Brad Aronstam of Connolly Bove Lodge & Hutz: Last week, Vice Chancellor Noble of the Delaware Court of Chancery rendered this short opinion – in Henkel Corp. v. Innovative Brands Holdings – in which he addressed the issue of when a would-be acquirer must assert a claimed material adverse effect in declining to complete an agreed upon acquisition.

In short, VC Noble held that the parties’ failure to specify in the merger agreement a particular timetable for the acquirer to claim an asserted MAE precluded the Court, on the pending motion to dismiss before it, from concluding as a matter of law that the acquirer was not entitled to make its MAE election in the future. It bears noting that the Court reached this decision notwithstanding the acquirer’s argument that the seller remained subject to a no-shop clause in the merger agreement which effectively precluded the seller from seeking other purchasers.