Chancery Enjoins Hostile Bid as Remedy for Violation of Confidentiality Agreement

Martin Marietta Materials, Inc. v. Vulcan Materials Co., C.A. No. 7102-CS (Del. Ch. May 4, 2012).

Issue Addressed: Whether the Court should enjoin a hostile bid based on the disclosure of information in violation of the parties’ confidentiality agreement. Short Answer: Yes.

Background

This 138-page decision was issued after the close of the markets on Friday afternoon and generated several articles over the weekend in the trade press, business publications, mainstream media and by legal commentators. So much so, that a summary even now, on the next business day, would add little to what has already been said. Still more, Martin Marietta announced today that they would appeal to the Delaware Supreme Court. For a sample of the stories, see, e.g., here and here.

Nonetheless, in a nutshell, Vulcan and Martin Marietta had been flirting with each other regarding a possible combination for about a decade. Their most recent courtship was reignited in 2010. They signed a confidentiality agreement that contemplated an amicable business combination but at some point, Martin Marietta disclosed that information as part of a hostile bid.

Analysis

The Court emphasized that its decision was based entirely on contract law and its reasoning did not rely on any fiduciary principles. Professor Steven Davidoff provides an insightful analysis and encourages a reading of the tome for its perspective on the minutiae of how deals are made–or sought to be made. Professor Davidoff’s overview of the case does it justice. Perhaps we will provide a more comprehensive summary later, as well as noteworthy details regarding the embryonic appeal as it develops.

Supplement: Eduardo Gallardo of Gibson Dunn provides an overview of the case here.

UPDATEAs Tom Hals of Reuters reports, the Delaware Supreme Court has granted an expedited appeal and scheduled oral argument on May 31, which is one day prior to the  Vulcan shareholders meeting. Courtesy of Frank Reynolds of Thomson Reuters, we have an analysis of the briefs submitted to the Delaware Supreme Court.