Wednesday, June 29, 2016
Former Delaware Chancellor William (Bill) Chandler and Elizabeth Hecker, a fellow lawyer at Wilson Sonsini Goodrich & Rosati presented on benefit corporations and Delaware law at the Berle VIII conference. I cannot fully communicate how exciting it was to hear a distillation of Delaware law generally and several opinions specifically from a judge involved in the cases. In short: it was thrilling.
Former Chancellor Chandler discussed the Delaware case law interpretation of shareholder value and its place in analyzing corporate transactions. While these aren't words that he used, I have been thinking a lot about this tension as a question of complimenting or competing. The simple message was that the "inc." behind corporate names means something. But the question, is what does that mean? It signals, among other things, that a Delaware court will invalidate a board of directors' other serving actions only if they are in conflict with shareholder value, but never when it is complimentary. And there is a expanding appreciation of when "other interests" are seen as complimentary to, and not in competition with, shareholder value maximization.
Former Chancellor Chandler reminded us that shareholder value can include long term interests as the Delaware Chancery Court concluded in February 2011 in the Airgas case where Delaware upheld a board's defensive actions taken, in part, on the belief that the offer didn't include the full long-term value. The Airgas opinion is available here. The original $5.9B bid for Airgas, which the BOD said, despite an informed shareholder vote in its favor, didn't capture the full value of the company. The market validated Airgas' board's position and the Delaware court's adoption of that view. Airgas completed its merger with Air Liquide in May, 2016 for $10.3B.