November 18, 2015

Delaware Merger Objection Lawsuits Decline After Rejection of Disclosure-Only Settlements

Here’s an excerpt from this blog by Kevin LaCroix:

At least based on the evidence that The Chancery Daily compiled, the plaintiffs’ lawyers have been paying attention. At least according to The Chancery Daily, fewer merger objection lawsuits are now being filed. In order to track these trends, The Chancery Daily compiled a list of all merger objection suits filed in the Delaware Chancery Court between January 1 and November 15, 2015. The fewest number of merger objection suits filed in any month took place in October, when there were only 16 suits filed. Tellingly, there were 14 filed in the first half of October and only two in the second half. During the first half of November, there were only five. The significance of these lower numbers can be seen by considering the number of merger objection lawsuit filings as a percentage of all corporate and commercial lawsuit filings; the Chancery Daily found that year-to-date lows of 23% and 18% in October and the first half of November, respectively.

The Chancery Daily also took into account the possible effect of difference in merger transaction activity. Between January and September 2015, the ratio of the number of merger objection lawsuits to the number of merger transactions with a value of over $100 million was over 1.0 (meaning there were more merger objection lawsuits than mergers). However, in October, there were 16 merger objection lawsuits and 24 merger announcements, for a ratio of .69 (a figure that may not fully reflect the sharp drop off in the second half of October, after Vice Chancellor Laster’s opinion in the Aruba case).

The Chancery Daily summarized its findings by saying that “While not conclusive, the decline in class action filings in October and the first half of November in the absence of corresponding declines in total filings or deal volume is consistent with plaintiffs’ reluctance to file in Delaware following the Aruba holding.”