In Re SeraCare Life Sciences Inc. Shareholders Litigation, C.A. No. 7250-VCG (Del. Ch. March 20, 2012) (Transcript Ruling).
Whether a motion for expedited proceedings should be granted in connection with challenges to process and disclosures regarding a proposed merger transaction.
The Court explained, with reasoning based on prior cases, why the standard of “colorable claims” was not met in the circumstances of this case, and therefore, the prerequisites for imposing the substantial costs of expedition were not satisfied.
This Court of Chancery decision is similar in some ways to the recent decision in Stourbridge Investments, highlighted here, where a motion for expedited proceedings was denied in connection with the challenge to a deal. Also, as in the recent Chancery Micromet decision highlighted here, the El Paso case featured here and Delphi case reviewed here, despite conflict issues with one or more parties in the challenged deal, the Court determined that injunctive relief was not warranted and would not be helpful.
Free Cash Flows – Disclosure Issue
The Court referred to a prior decision by the Court of Chancery in the Knighthawk case where the Court rejected similar arguments and determined that where an advisor derives free cash flow projections on its own, those projections do not have to be disclosed.
Net Operating Losses – Disclosure Issue
The next disclosure claim alleged that the disclosures should have provided more detail about how the net operating loss carry-forward was to be used in the future. However, the Court referred to the recent Chancery decision in the Micromet case where the Court determined unequivocally that this same exact information was a “level of granular disclosure not required under our law.”
The Court emphasized that the applicable standard of materiality does not require disclosure of details regarding potential deals that were never consummated or proposed.
Potential Conflict of Financial Advisor
The Court took very seriously the allegations that the role of advisor William Blair was tainted by the fact that it had been retained by the target previously in the prior sale process even though it was currently the financial advisor for the buyer. Nonetheless, the Court explained that it did not believe that injunctive relief would be an effective remedy, and that was an additional reason why the motion to expedite was denied. Kevin Miller of Alston & Bird provided a summary of this case on the PLI Securities Law Practice Center website