February 1, 2022
Corwin: Del. Chancery Holds Failure to Disclose Prior Offer Not Material
In Galindo v. Stover, (Del. Ch.; 1/22), the Chancery Court held that Noble Energy’s failure to disclose a prior unsolicited acquisition overture and the reasons for amending its change-in-control severance plan were not material omissions precluding application of Delaware’s Corwin doctrine to fiduciary duty claims arising out of the company’s 2020 sale to Chevron.
Noble Energy’s proxy statement for the Chevron sale did not disclose an unsolicited 2018 proposal from Cynergy to acquire certain of the company’s Mediterranean assets. The plaintiffs alleged that the company’s failure to address this prior overture meant that stockholders lacked “full disclosure of the potential superior offers in the market” when they approved the Chevron transaction. Vice Chancellor Glasscock rejected this argument, and this excerpt from his opinion summarizes his reasoning:
The Cynergy proposal was unsolicited, made in mid-2018, and predated important contextual developments, such as the commercialization of the Leviathan field and the onset of the COVID-19 pandemic. Further, the Cynergy proposal contemplated an entirely different transaction structure than the one achieved in the Merger with Chevron. Additionally, the Cynergy proposal was never entertained by management or the Board. Even drawing all reasonable inferences in favor of the Plaintiffs, the alleged failure to fully inform stockholders with respect to the Cynergy proposal cannot survive.
The Vice Chancellor also rejected claims that the company should have disclosed the timing and rationale for the board’s decision to amend a company severance plan to provide its officers – who took a cut in pay due to the pandemic – with change-in-control benefits that reflected their pre-pandemic salaries. In doing so, he noted that the amended plan & the benefits payable under its terms were both disclosed in the proxy statement, and that the additional information the plaintiffs sought would not have altered the total mix of information available to Noble’s shareholders.
– John Jenkins