Justia Mergers & Acquisitions Opinion Summaries

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In 2020, Illumina, a for-profit corporation that manufactures and sells next-generation sequencing (NGS) platforms, which are crucial tools for DNA sequencing, entered into an agreement to acquire Grail, a company it had initially founded and then spun off as a separate entity in 2016. Grail specializes in developing multi-cancer early detection (MCED) tests, which are designed to identify various types of cancer from a single blood sample. Illumina's acquisition of Grail was seen as a significant step toward bringing Grail’s developed MCED test, Galleri, to market.However, the Federal Trade Commission (FTC) objected to the acquisition, arguing that it violated Section 7 of the Clayton Act, which prohibits mergers and acquisitions that may substantially lessen competition. The FTC contended that because all MCED tests, including those still in development, relied on Illumina’s NGS platforms, the merger would potentially give Illumina the ability and incentive to foreclose Grail’s rivals from the MCED test market.Illumina responded by creating a standardized supply contract, known as the "Open Offer," which guaranteed that it would provide its NGS platforms to all for-profit U.S. oncology customers at the same price and with the same access to services and products as Grail. Despite this, the FTC ordered the merger to be unwound.On appeal, the United States Court of Appeals for the Fifth Circuit found that the FTC had applied an erroneous legal standard in evaluating the impact of the Open Offer. The court ruled that the FTC should have considered the Open Offer at the liability stage of its analysis, rather than as a remedy following a finding of liability. Furthermore, the court determined that to rebut the FTC's prima facie case, Illumina was not required to show that the Open Offer would completely negate the anticompetitive effects of the merger, but rather that it would mitigate these effects to a degree that the merger was no longer likely to substantially lessen competition.The court concluded that substantial evidence supported the FTC’s conclusions regarding the likely substantial lessening of competition and the lack of cognizable efficiencies to rebut the anticompetitive effects of the merger. However, given its finding that the FTC had applied an incorrect standard in evaluating the Open Offer, the court vacated the FTC’s order and remanded the case for further consideration of the Open Offer's impact under the proper standard. View "Illumina v. FTC" on Justia Law

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In this case surrounding the acquisition of Twitter Inc., the Court of Chancery denied Plaintiff's motion for mootness fees, holding that Plaintiff's claim was without merit.Defendants Elon R. Musk, X Holdings I, Inc., and X Holdings II, Inc. agreed to acquire Twitter Inc. pursuant to an agreement and plan of merger (merger agreement). After Defendants' counsel sent a letter to Twitter claiming to terminate the merger agreement Twitter filed a complaint seeking specific enforcement. Thereafter, the deal closed on the original terms of the merger agreement. Plaintiff, who held 5,500 shares of Twitter common stock, brought suit seeking specific performance and damages, claiming that Elon Musk breached his fiduciary duties as a controller of Twitter and that Defendants breached the merger agreement. This Court issued a memorandum opinion dismissing most of Plaintiff's complaint, leaving open the possibility that the damages provision in the merger agreement conveyed third-party beneficiary status to stockholders claiming damages for breach of the agreement. Months later, Plaintiff claimed partial credit for the consummation of the deal and petitioned for mootness fees in the amount of $3 million. The Court of Chancery denied Plaintiff's motion for mootness fees, holding that Plaintiff's claim was not meritorious when filed. View "Crispo v. Musk" on Justia Law

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Joy Global and Komatsu agreed to merge. Joy sent its investors disclosures required under the Securities Exchange Act, 15 U.S.C. 78n. Subsequent suits contended that Joy violated the Act by not disclosing some internal projections of Joy’s future growth that could have been used to negotiate a higher price, rendering the proxy statements fraudulent, and that Joy’s directors violated their state law duties by not maximizing the price for the shareholders. The suits settled for $21 million.The district court held that the $21 million loss is not covered by insurance. The policies do not require indemnification for “any amount of any judgment or settlement of any Inadequate Consideration Claim other than Defense Costs.” An “inadequate consideration claim” is that part of any Claim alleging that the price or consideration paid or proposed to be paid for the acquisition or completion of the acquisition of all or substantially all the ownership interest in or assets of an entity is inadequate.The Seventh Circuit affirmed. The suits assert the wrongful act of failing to disclose documents that could have been used to seek a higher price and are within the definition of “inadequate consideration claim.” The claims do not identify any false or deficient disclosures about anything other than the price. The only objection to this merger was that Joy should have held out for more money, and that revealing this would have induced the investors to vote “no.” View "Joy Global Inc. v. Columbia Casualty Co." on Justia Law

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The Eighth Circuit affirmed the district court's dismissal of a complaint brought by plaintiff against Employers Mutual and Defendant Kelley, asserting a claim for breach of fiduciary duty. Plaintiff was a minority shareholder of EMC, a spin-off from Employers Mutual. Defendant Kelley was the CEO and director of both EMCI and Employers Mutual. Plaintiff alleges that Employers Mutual structured EMCI as a shell company, preventing it from becoming a valuable company or acting independently from Employers Mutual. Plaintiff alleged in the complaint that, in the years leading up to the squeeze-out merger initiated by Employers to purchase EMCI's remaining shares, defendants breached fiduciary duties owed to him as a minority shareholder of EMCI.The court concluded that plaintiff's claim did not arise in the context of a contractual relationship; his alleged injury arose only from his status as a shareholder of EMCI; and this was insufficient under Iowa law to plausibly plead a special duty arising out of a contractual relationship. Furthermore, plaintiff did not adequately plead that his injury arose from a special duty. The court also concluded that plaintiff did not allege that his voting rights were ever affected by Employers Mutual and Kelley's alleged mismanagement. Even if this were Iowa law, plaintiff would not meet this exception.Accordingly, because plaintiff's claim is derivative in nature, he must satisfy federal and Iowa requirements for a filing a derivative action, which he has failed to do so. In this case, the complaint did not state with particularity plaintiff's efforts to enforce minority shareholder rights in the years leading up to the squeeze out. Furthermore, the complaint did not allege that he petitioned the directors or other shareholders in writing, or that 90 days have expired since delivery of the demand and EMCI rejected his request, or irreparable injury would result by waiting for the expiration of the ninety days. View "Shepard v. Employers Mutual Casualty Co." on Justia Law

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Azarax filed suit against defendant and his law firm, alleging legal malpractice and breach of fiduciary duty. Azarax claimed that defendant and his firm were negligent in their representation of Convey Mexico and that Azarax had claims against defendant and his firm as a successor by merger to Convey Mexico.The Eighth Circuit affirmed the district court's dismissal of the complaint and agreed with the district court that Azarax was not a valid successor in interest to Convey Mexico. In this case, the summary judgment record established that the shareholders of Convey Mexico did not unanimously provide written consent for the merger with Azarax Holding, so the merger was not valid. Therefore, Azarax lacked standing to sue defendant and his law firm. The court modified the judgment to dismiss the complaint without prejudice. View "Azarax, Inc. v. Syverson" on Justia Law

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JELD-WEN's customers, Steves and Sons, filed suit challenging JELD-WEN's acquisition of a competitor. After a jury found that the merger violated the Clayton Antitrust Act and that Steves and Sons was entitled to treble damages, the district court granted Steves and Sons' request to unwind the merger and plans to hold an auction for the merged assets after this appeal. The district court then held another trial before a different jury on JELD-WEN's countersuit against Steves and Sons for trade secret misappropriation, allowing three individuals to intervene in the case. The jury ruled in favor of Steves and Sons on most of JELD-WEN's claims and entered judgment for the intervenors.The Fourth Circuit concluded that the district court properly declined to grant JELD-WEN judgment as a matter of law on whether Steves and Sons demonstrated antitrust injury; the district court acted within its discretion by excluding certain evidence from the antitrust trial and by ordering JELD-WEN to unwind the merger, rejecting JELD-WEN's laches defense in the process; the district court properly found that equitable relief under the Clayton Act was appropriate because the merger created a significant threat that Steves and Sons will go out of business in 2021; and JELD-WEN has not shown that the district court's jury instructions in the trade-secrets trial were improper.However, the court vacated the jury's award of future lost profits to Steves and Sons in the antitrust trial because the issue is not ripe. The court explained that the injury on which the future lost profits award was premised cannot occur until September 2021, and the Clayton Act requires a plaintiff seeking damages—as opposed to equitable relief—to "show actual injury." The court also vacated the district court's entry of judgment for the intervenors in the trade-secrets case because JELD-WEN brought no claims against them. View "Steves and Sons, Inc. v. JELD-WEN, Inc." on Justia Law

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Towers Watson & Co. (“Towers”) and Willis Group Holdings Public Limited Company (“Willis”) executed a merger agreement with closing conditioned on the approval of their respective stockholders. Although Towers had stronger performance and greater market capitalization, Willis stockholders were to receive the majority (50.1 percent) of the post-merger company. Upon the merger’s public announcement, several segments of the investment community criticized the transaction as a bad deal for Towers and a windfall for Willis. Towers’ stock price declined and Willis’s rose in reaction to the news. Proxy advisory firms recommended that the Towers stockholders vote against the merger, and one activist stockholder began questioning whether Towers’ management’s incentives were aligned with stockholder interests. Also, after announcing the merger, ValueAct Capital Management, L.P. (“ValueAct”), an institutional stockholder of Willis, through its Chief Investment Officer, Jeffrey Ubben, presented to John Haley, the Chief Executive Officer (“CEO”) and Chairman of Towers who was spearheading the merger negotiations, a compensation proposal with the post-merger company that would potentially provide Haley with a five-fold increase in compensation. Haley did not disclose this proposal to the Towers Board. In light of the uncertainty of stockholder approval, Haley renegotiated the transaction terms to increase the special dividend. Towers eventually obtained stockholder approval of the renegotiated merger. The transaction closed in January 2016, and the companies merged to form Willis Towers Watson Public Limited Company (“Willis Towers”). Haley became the CEO of Willis Towers and was granted an executive compensation package with a long-term equity opportunity similar to ValueAct’s proposal. At issue were stockholder suits filed in early 2018. Here, Towers stockholders alleged that Haley breached his duty of loyalty by negotiating the merger on behalf of Towers while failing to disclose to the Towers Board the compensation proposal. The Court of Chancery dismissed the claims, holding that the business judgment rule applied because “a reasonable board member would not have regarded the proposal as significant when evaluating the proposed transaction,” and further holding that plaintiffs had failed to plead a non-exculpated bad faith claim against the Towers directors. To the Delaware Supreme Court, plaintiffs argued the Court of Chancery erred in holding the executive compensation proposal was not material to the Towers Board. To this, the Supreme Court concurred, reversed the Court of Chancery, and remanded for further proceedings. View "City of Fort Myers General Employees' Pension Fund v. Haley" on Justia Law

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The Eighth Circuit affirmed the district court's dismissal of plaintiffs' putative class action against First Federal and former directors of Inter-State. Plaintiffs alleged that Inter-State's merger with First Federal was inequitable because Inter-State had $25 million more than First Federal in excess capital. Plaintiffs claimed that the surplus should have been distributed to Inter-State's members instead of becoming part of the merged entity, and that the decision to merge should have been decided by a vote of Intra-State's members.The court held that the district court correctly concluded, based on long-standing Supreme Court precedent, that Inter-State's members did not have an ownership interest in its surplus. Even assuming a provision in Inter-State's charter was unique and that this was a case of first impression, the court held that Inter-State's members would not have an ownership interest in the $25 million surplus based on the provision's plain language. Therefore, without an ownership interest, plaintiffs have not stated a claim against defendants and the district court properly dismissed their claims expressly premised on an ownership interest in the surplus. View "Chase v. First Federal Bank of Kansas City" on Justia Law

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The FTC and the State of North Dakota moved to enjoin Sanford Bismarck's acquisition of Mid Dakota, alleging that the merger violated section 7 of the Clayton Act. The district court determined that plaintiffs would likely succeed in showing the acquisition would substantially lessen competition in four types of physician services in the Bismarck-Mandan area.The Eighth Circuit affirmed the district court's grant of a preliminary injunction, holding that the district court did not improperly shift the ultimate burden of persuasion to defendants and properly followed the analytical framework in U.S. v. Baker Hughes, Inc., 908 F.ed 981 (D.C. Cir. 1990); the district court did not clearly err in defining the relevant market; and the district court's finding on merger-specific efficiencies was not clear error. View "Federal Trade Commission v. Sanford Health" on Justia Law

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The Second Circuit vacated the district court's dismissal of plaintiff's complaint, based on forum non conveniens grounds, alleging claims for damages under federal and state law in connection with a ʺgoing private mergerʺ by which certain controlling defendants purchased American Depositary Shares (ADSs) from Dangdang's minority shareholders.The court held that the district court abused its discretion by failing to consider the forum selection clause contained in the relevant documents and its impact on the forum non conveniens analysis. The court rejected defendants' claim that plaintiffs waived their reliance on the forum selection clause by failing to raise the issue in the district court. The court also held that remand to the district court was necessary for the district court to consider the scope and enforceability of the forum selection clause. View "Fasano v. Li" on Justia Law