In a recent case, the Delaware Court of Chancery upheld a pair of confidentiality agreements and temporarily enjoined an acquiror from prosecuting a proxy contest and proceeding with a hostile bid for its industry rival. In the spring of 2010, the acquiror and the target executed two stringent confidentiality agreements to enable their merger and antitrust discussions. The acquiror decided to make a hostile bid for the target and also launched a proxy contest designed to make the target more receptive to its offer. The court found that the acquiror used protected confidential material in making and launching its hostile bid and proxy contest.
The court determined that the acquiror had breached the confidentiality agreements based on doing the following:
- using protected information in formulating a hostile bid, since the information was only to be used in an agreed-to business combination
- selectively disclosing protected information in one-sided securities filings related to its hostile bid, when such information was not disclosed in response to a third-party demand and when the acquiror failed to comply with the agreements' notice and consent process
- disclosing protected information in non-SEC communications in an effort to "sell" its hostile bid
The court enjoined the acquiror for four months from prosecuting a proxy contest, making an exchange or tender offer, or otherwise taking steps to acquire control of the target's shares or assets.
Martin Marietta Materials, Inc. v. Vulcan Materials Co., C.A. 7102-CS (Del. Ch. May 4, 2012)