M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Tuesday, October 30, 2007

Icahn's Complaint

It is a bit odd, but it doesn't appear that Icahn has filed his complaint yet in Delaware Chancery Court.  At least it is not showing up on Lexis as being filed.  I say, odd, because I have a copy of it in my hands as we speak.  So, I'm not going to post it yet, but can report the following.  The complaint is rather summary, and in it, Icahn asks for two major grounds of relief:

  • First, that BEAS be ordered to hold its annual meeting no later than November 30, 2007.
  • Second, Icahn requests that BEAS be:
    • Temporarily, preliminarily and permanently enjoining defendants and all those acting in concert with them from taking any action to (1) issue shares of the Company's stock, (2) to sell any material assets of the Company, (3) interfere with a proper sale of the Company, or (4) take any other action that would have the effect of interfering. with a full, fair and free vote by the Company's shareholders at the annual meeting without first obtaining approval by the Company's shareholders . . . .

The second request is clearly a placeholder.  The Delaware courts are unlikely to grant such broad relief without a specified transaction pending which violates Blasius or one of the other standards of review under Delaware law (Blasius is the most likely standard applying here with respect to shareholder votes -- for an explanation of the Blasius standard see here). 

But there is one interesting statement in the complaint on this: 

It appears that the Company's management wants neither a bid much less the prospect that nominees of the Icahn Group sit around the board table with them. Plaintiffs have reason to believe that to fend off such Wanted oversight, the Company will place new blocks of stock in friendly hands before any stockholders' meeting can be scheduled or to conduct a "strategic transaction" that would entrench management in place.

Can it be true?  Is BEAS really contemplating issuing a "sweet-heart" preferred?  We haven't seen this type of share placement since the late eighties/early nineties.  And it has fallen out of disfavor because it is viewed as inappropriately influencing the takeover process and entrenching management.  Nonetheless, in Shamrock Holdings, Inc. v. Polaroid Corp., 559 A.2d 257, 269- 70 (Del.Ch.1989) and other cases the Delaware courts have taken a lenient approach in enjoining or otherwise prohibiting such action.  So, perhaps BEAS management is willing to take the shareholder heat in order to preserve their jobs.  Stranger things have happened. 


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