February 17, 2011
(More) Airgas Commentary
(NOTE: I'm jumping right into the Airgas fray here. If you want an introduction to the case, go here.)
So, a Delaware corporation's board of directors can effectively "just say no" to a takeover attempt--despite protestations to the contrary. (Compare Jay Brown ("The court emphatically concluded that it was not validating the 'just say no' approach to tender offers. But in fact it was.") with Stephen Bainbridge ("[T]he case finally gives us a clear statement of Delaware law to the effect that: 'A board cannot 'just say no' to a tender offer.'"). Stephen Bainbridge has a great summary of the commentary here (including our own Josh Fershee). In my initial review of what other people are saying, I found the following from Steven Davidoff particularly worth passing on:
Chancellor Chandler asserted that he wanted to order the poison pill redeemed because this contest had lasted more than 16 months, Air Products’ offer was noncoercive, and shareholders could now decide the matter on a fully informed basis. But Delaware Supreme Court jurisprudence did not allow it. . . . The Airgas board was responding to "substantive coercion," a term that refers to what two professors, Ronald J. Gilson and Reinier Kraakman, call “the risk that shareholders will mistakenly accept an underpriced offer because they disbelieve management’s representations of intrinsic value.” . . . Like the good professors, it appears that the judge thinks that substantive coercion is a straw man, which is too vague to be used and can serve to protect an entrenched board. The lower court opinions he cites support this position. By citing them, Chancellor Chandler passive-aggressively rebuts the contrary position of the Delaware Supreme Court. The judge contends that when takeover contests reach an end stage, the courts should step in to ensure that there is a sale process. But the Supreme Court does not agree; instead assessing an undervalued offer is the domain of the board.