October 24, 2011

Merger Escrows and Approval by Consent/Omnicare

From John Grossbauer of Potter Anderson: In this recent Revlon decision from Delaware Vice Chancellor Noble, among other things, (1) he rejects claims that the board breached its duties by providing for an escrow in a merger agreement (there is no discussion of the escrow mechanics, though); and (2) it rejects a contention that the board violated Omnicare by obtaining stockholder written consent shortly after the board approved the merger agreement (where the board members themselves held or controlled sufficient stock to give the consent). There was a no-solicitation provision without a fiduciary out. But importantly, the board itself could terminate within 24 hours if consent was not obtained and the company did not have to pay a termination fee. The court also emphasized that no competing proposal had emerged.