Tuesday, August 7, 2007
The merger agreement contains a fiduciary out permitting Dow Jones to terminate the merger agreement in the case of a superior proposal and prior to a shareholder vote. Historically and given how public the sale of Dow Jones has been, the M&A lawyers could have taken the position that such a fiduciary out was unnecessary, particularly given the existence of a voting agreement with respect to 37% of Dow Jones voting stock. Nonetheless, such a position is likely completely foreclosed by the Delaware Supreme Court's decision in Omnicare, Inc. v. NCS HealthCare, Inc. And accordingly, the agreement also contains a break-up fee of $165 million, and a no-solicit as well. Prospective bidders take note.
For those wishing to assess the antitrust risk of the deal, the relevant provision is in clause 5.5 of the Merger Agreement. The provision is unusual in that it requires Dow Jones to use its "best efforts" to close the deal. Practitioners will note that typically the clause is "reasonable best efforts". "Best efforts" has been interpreted in some jurisdictions to require all actions short of bankruptcy. "Reasonable best efforts" requires something less -- how much less is uncertain but generally the efforts a reasonable person would use (NB. these are general descriptions, the definition of both terms is hoplessly muddled and conflicted in the courts -- an observation made by Allan Farnsworth decades ago and still true today). Clause 5.5 also contains a limiting provision that excludes from the "best efforts" requirement the disposal of material assets and businesses. And while this ameliorates some of its bite, the clause still gives Dow Jones significant power to force News Corp. to satisfy any antitrust concerns.
I also have comments on the voting agreementI which I will reserve for a separate post.