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Boston College Law School

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Wednesday, September 5, 2007

MGIC/Radian Deal -- RIP

MGIC Investment Corporation and Radian Group Inc. jointly announced today that they have terminated their pending merger.  Here were the very nice comments each had for the other in their joint press release:

Curt Culver, MGIC Investment's CEO, said, "I am pleased MGIC and Radian were able to reach this amicable resolution. During the course of the merger process, our MGIC team met many fine people from Radian. We wish them the best."

S.A. Ibrahim, Radian Group's CEO, said, "Our mutual decision to terminate the pending merger represents the best outcome for both companies under the circumstances. We wish MGIC and its employees well."

MGIC is clearly the much happier of the two, though, as MGIC had previously asserted that a material adverse change had occurred to Radian permitting MGIC to terminate their merger arrangement.  To my knowledge, this is the first deal to be terminated on MAC grounds because of the sub-prime mortgage crisis.  And a quick review of the termination and release agreement finds that it will be a clean break.  MGIC will not pay any funds to Radian in connection with this termination.  I have to admit, I am a bit surprised about this.  Based on the publicly available facts, Radian appeared to have reasonable grounds to deny that a MAC had occurred.  Nonetheless, advised by Wachtell, Radian has chosen to drop any claims and the value in them.  Presumably, they know more than I do. 

Ultimately, the case points to why there is so little case-law on MACS out there -- the parties typically settle these cases by terminating the deal or renegotiating the price (as appears to be the trajectory of the Lone Star/Accredited Home deal).  And given the settlement and the lack of full disclosure here, it is hard to draw any conclusions from this termination for the other pending MAC cases out there.  Oh -- and those nice comments above -- well expect them in all of the parties' comments on the terminated deal.  Each agreed in the termination agreement to a non-disparagement clause for the next 18 months.  Hopefully, this clause will not chill their speech and prevent full disclosure by Radian to its shareholders of the facts which led to this deal termination.  They are having a hard enough day today as it is. 

http://lawprofessors.typepad.com/mergers/2007/09/mgicradian-deal.html

Material Adverse Change Clauses, Mergers | Permalink

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