June 23, 2009
Delaware Supreme Court Affirms Alliance Data Systems
Last week, the Delaware Supreme Court affirmed – in Alliance Data Systems v. Blackstone Capital Partners V – the Chancery Court’s decision dismissing Alliance Data Systems suit against Blackstone acquisition entities for breach of their merger agreement.
As we have blogged, the Chancery Court had dismissed ADS’s claims that the Blackstone shell entities that had signed the merger agreement to acquire ADS had breached their obligations under the merger agreement and were obligated to pay ADS a $170 million “business interruption fee.” The Chancery Court found that those Blackstone entities had fulfilled their obligations under the merger agreement and had not promised to cause the Blackstone entities that control them to agree to terms demanded by the Office of the Comptroller of the Currency in order to obtain a required regulatory approval.
The Chancery Court’s decision was widely considered an affirmation of the typical private equity transaction structure in which PE managers/advisors seek to shield themselves and their investment funds from liability for breaches of the transaction agreement by forming shell acquisition vehicles to enter into the transaction agreement.
In the succinct ruling, the Delaware Supreme Court stated: “Upon consideration of the briefs of the parties and their contentions in the briefs and oral argument, it appears to the Court that the judgment of the Court of Chancery should be affirmed on the basis of and for the reasons set forth in its well-reasoned January 15, 2009 opinion.”