Monday, September 12, 2011
As part of its hostile effort to acquire Pharmerica, last week Omnicare filed suit against Pharmerica and its board. Here's the Omnicare - Pharmerica complaint. Now, let me state right up front that I don't think this suit falls into the more general category of litigation flotsam that accompanies many merger announcements these days. Although this is acquisition-related litigation, it involves a purported acquirer attempting to have the target's board withdraw its defenses against the offer. This case is more along the lines of the Airgas scenario. In any event, given Airgas, one wonders whether Omnicare thinks it can pull an Omnicare-styled rabbit of the litigation hat. And why not? It happened famously for them once before.
In any event, the first defense that Omnicare would like the court to order withdrawn is Pharmerica's pill. It's hard, given Airgas, to come up with a reasonable justification for the court to order Pharmerica's board to pull its pill. Maybe after a year or trying, but now? Probably not. Omnicare's argument that Pharmerica's board is violating its fiduciary duties by not negotiating with Omnicare is going to fall flat. The requirement is that Pharmerica's board be informed. There is no requirement that it negotiate to sell its company to an unwanted bidder. Of course, this is complicated by the fact that early in the summer, Pharmerica's CEO approaced Omnicare's CEO to discuss a possible combination, but that's just a complication. Omnicare doesn't present any evidence to seriously suggest that Pharmerica's board is uninformed about its decision not to engage with Omnicare.
Second, Omnicare would like the court order Pharmerica's board to adopt resolutions exempting Omnicare from the effects of DGCL 203. Yikes. Omnicare's argument is essentially that Pharmerica's board is violating its fiduciary duties to the corporation by not actively exempting an unwanted bidder from Delaware's antitakeover statute. Absent egregious facts that aren't present in the complaint, I can't imagine a court taking that argument all that seriously.