Tuesday, May 31, 2011
Every now and then we get a case that helps provide additional color to the perenial question - how much cash is enough cash to trigger Revlon obligations? Now comes Smurfit-Stone. In Smurfit-Stone, Vice Chancellor Parsons gives us another marker.
Two earlier cases provided some help with this question. First there is In re Santa Fe. in that transaction, consideration was compromised of 33% cash. There, the Delaware Supreme Court ruled that 33% cash consideration is not sufficient to trigger enhanced scrutiny under Revlon. On the other hand, In re Lukens, the court ruled that a transaction with 62% of the consideration in cash was sufficient to trigger Revlon obligations. That large area in the middle remained a gray zone with respect to the question of triggering Revlon. Now that range has been reduced. In Smurfit-Stone, the transaction consideration was 50% cash. Noting that the Delaware Supreme Court has not provided explicit guidance on where the line between Revlon and "non-Revlon" transactions, Vice Chancellor Parsons ruled that 50% cash consideration is sufficient to trigger enhanced scrutiny under Revlon. Here's the Smurfit-Stone opinion.