Corporate Securities Law Blog

On January 18, 2008, the Federal Trade Commission announced new jurisdictional and filing fee thresholds under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, Section 7A of the Clayton Act, 15 U.S.C. § 18a, et seq. (the “HSR Act”).  The new HSR thresholds will apply to transactions that close on or after February 28, 2008.  The new minimum HSR threshold for a reportable transaction is $63.1 million. The amount of the filing fees are not changed, although the thresholds that determine the amount of the filing fee are increased.

No MAE Occurred Based on Merger Agreement Carve-Out

On December 27, 2007 the Tennessee Chancery Court ordered sportswear retailer Finish Line, Inc. (FINL.O), to complete its purchase of Tennessee-based shoe and hat retailer Genesco, Inc. (GCO.N), as contemplated by a merger agreement offering $54.50 per share for a total purchase price of $1.5 billion.

Amendments to the best price rule applicable to tender offers for securities registered under the Securities Exchange Act of 1934 became effective in December 2006.  The best price rule requires that the consideration paid to any security holder in a tender offer be the highest consideration paid to any other security holder in the tender offer with the result that all shareholders are to be treated equally.

As of October 24, 2007, Sallie Mae and the buyout group led by J.C. Flowers have failed to negotiate an agreement on dropping conditions of the buyout deal that prevent Sallie Mae from talking to other potential suitors.  This comes following the buyout group's assertion that a Material Adverse Effect has occurred and that it does not intend to proceed with the buyout deal.  In response to the buyout group's "cold feet," Sallie Mae filed suit in Delaware seeking payment of a $900 million termination fee.

In In re Netsmart Technologies, Inc. Shareholders Litigation, C.A. No. 2536-VCS (Del. Ch. Mar. 14, 2007), Vice Chancellor Strine held that the shareholder plaintiffs demonstrated a probability of success on the merits of their claim that the Netsmart board of directors failed to fulfill their Revlon duties in considering and approving a cash sale of the company to two private equity firms.  The Court determined that the board’s decision not to conduct a broad market canvass for strategic acquirers, and instead focus the search for acquirers solely on private equity firms, did not appear to be reasonable under the circumstances.  The Court also held that the post-signing “market check” recommended by the company’s financial advisers was not appropriate for a small-cap company like Netsmart, thus was far too passive to have been effective in mitigating the narrowness of the pre-signing market canvass.  This decision provides guidance to boards when considering a sale to a private equity firm — an increasingly common situation affecting boards of directors of public companies throughout the country.

Creators of original works protected by copyright, patent, and trademark allow others to use those works by way of license agreements. An IP license agreement may grant the licensee the right to distribute goods and services to the public under the licensor's mark, or the right to utilize certain technology or software. The licensor may have concerns about an opposing party in litigation, or a competitor, acquiring the licensee, thereby gaining access to the licensed rights. To address these concerns, many license agreements prohibit the transfer of the licensed rights without the permission of the licensor. At present, however, many jurisdictions have no clearly controlling authority which establishes whether a merger transaction, and in particular the widely used reverse triangular merger, results in a transfer of licensed rights which would be prohibited by a typical anti-assignment clause. 

A recent Delaware Chancery Court decision raises questions about certain common merger practices. The opinion, In re TCI Shareholders Litigation, criticizes both:

• the use of a contingent fee arrangement by an investment bank that issued a fairness opinion to a special committee; and
• a special committee's use of investment bankers and legal counsel who had worked for the company.