Delaware's 'No-Go' Treatment of No-Talk Provisions: Deal-Protection Devices after Omnicare

36 Pages Posted: 10 Oct 2008 Last revised: 24 Feb 2010

See all articles by Amy Yeung

Amy Yeung

ZeniMax Media Inc.

Charles B. Vincent

Labaton Sucharow LLP; Widener University - Widener University School of Law; Delaware Journal of Corporate Law

Date Written: September 15, 2008

Abstract

This article analyzes the Delaware courts' treatment of clauses that can be treated under one interpretation as a "no-talk" deal-protection device used by corporations in friendly acquisitions. In Energy Partners, Ltd. v. Stone Energy Corp., a 2006 Delaware Court of Chancery opinion, the court focused on the narrow issue of whether a target could prevent an acquiring company from dealing with a third-party company that threatened its deal. Although the court denied injunctive and declaratory relief predominantly on ripeness grounds, an application of the facts of Energy Partners helps demonstrate how deal-protection devices have evolved since the controversial Omnicare decision. This article analyzes the recent Delaware Court of Chancery case and reaches three conclusions: (1) Omnicare continues to be restricted to its facts and could be further restricted to mergers facing review solely under Revlon; (2) provisions involving no-talk restrictions have been narrowly construed by the court in order to ensure that boards are not prohibited from exercising their fiduciary duties if a superior offer emerges; and (3) based on the court's treatment of legal restrictions vis-a-vis a merger, litigation in Delaware related to directors' fiduciary duties in a merger/acquisition context may be governed by the broad principle of encouraging discussions and negotiations with third parties when the directors have signaled the corporation's entrance into the merger/acquisition moment.

Keywords: Delaware, Journal, Corporate, Law, Omnicare, no-talk, friendly, acquisition, Chancery

Suggested Citation

Yeung, Amy and Vincent, Charles B., Delaware's 'No-Go' Treatment of No-Talk Provisions: Deal-Protection Devices after Omnicare (September 15, 2008). Delaware Journal of Corporate Law (DJCL), Vol. 33, No. 2, 2008, Available at SSRN: https://ssrn.com/abstract=1280116

Amy Yeung (Contact Author)

ZeniMax Media Inc. ( email )

1370 Piccard Drive
Suite 120
Rockville, MD 20850
United States

Charles B. Vincent

Labaton Sucharow LLP

300 Delaware Ave.
Suite 1225
Wilmington, DE 19801
United States

Widener University - Widener University School of Law ( email )

4601 Concord Pike
P.O. Box 7286
Wilmington, DE 19803
United States

Delaware Journal of Corporate Law

Widener University School of Law
P.O. Box 7286
Wilmington, DE 19803
United States

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