Thursday, May 30, 2013
NetSpend: Interesting Insights on Revlon Process, “Don’t Ask, Don’t Waive” Standstills & Fairness Opinions
The Delaware Chancery court's recent decision in Koehler v. NetSpend Holdings Inc. is worth a read for deal planners. Vice Chancellor Glasscock criticized the board's Revlon process, stating:
The Plaintiff has demonstrated that a reasonable likelihood exists that the sales process undertaken by the NetSpend Board—which included lack of a pre-agreement market canvass, negotiation with a single potential purchaser, reliance on a weak fairness opinion, agreement to forgo a post-agreement market check, and agreement to deal protection devices including, most significantly, a don’t-ask-don’t-waive provision—was not designed to produce the best price for the stockholders.
Nevertheless, in line with other recent Delaware decisions where the courts have been reluctant to enjoin a deal when there are no other potential bidders, the court denied plaintiff's motion to enjoin the deal. Still, Vice Chancellor Glassock's criticism of the fairness opinion provided by the company's financial advisor and the board's use of a DADW provision should give sellers some guidance for future deals.
For more info, take a look at this memorandum by Sullivan & Cromwell.