Monday, October 15, 2007
I have a couple of quick thoughts and will give a full analysis tomorrow morning. First, I think it is becoming increasingly clear that the parties are now arguing over the $900 million rather than salvaging a deal. Here, the argument appears to be revolving around whether the enacted bill only needs to be more adverse than what was disclosed in the 10-K or have a material adverse effect over and above the 10-K disclosure. Flowers is arguing the latter and focuses on this point in its counter-claim; SLM is arguing the former. As I've said before and based on publicly available information, I believe the Flowers reading is the better one; it is certainly the plain language of the contract.
On the expedited relief SLM has requested -- I think Flowers makes a good point that this is now only about the $900 million and they are willing to fight it out by permitting SLM to terminate the merger agreement without prejudice. This would alleviate SLM's need for expedited relief. Still, I think the judge on this matter, Vice Chancellor Strine, will grant the request to expedite as it will mean a trial and opinion is more likely. This is a prominent case and Strine will not only want to put his name on another notable opinion, but he has incentives to maintain Delaware as the more certain law on these adjudications by doing so (this will mean more companies choosing Delaware law and forum to adjudicate these disputes). Plus Strine wrote the opinion in IBP v. Tyson, the last big MAC case, and he will likely want to take the opportunity to flesh out the law on that opinion. From my perspective, this is a good thing as we could use more case law on the interpretation of the exclusions from a MAC definition.