The Delaware Court of Chancery recently declined to enjoin a merger between Plains Exploration & Production Company and Freeport-McMoran Copper & Gold, Inc. even though the Plains board of directors did not perform a market check before the merger, agreed to various deal protection measures and allowed its CEO to spearhead the negotiations. The Court found that the Plains board, given the circumstances, did not violate its so-called "Revlon" duties (to undertake reasonable efforts to secure the best value reasonably available to the stockholders). The Court rejected the plaintiffs' claim that the board was obligated to perform a pre-agreement market check, finding instead that the board, with significant expertise in the oil and gas industry, possessed a "body of reliable evidence with which to evaluate the fairness of the transaction." The Court also stated that because the board retained flexibility to consider any subsequent bids and ensured that the market had sufficient time to digest the proposed merger, the reasonable no-solicitation clause and other deal protection measures did not prevent another "serious bidder" from submitting a higher bid. Finally, the Court held that the board's decision to let the CEO lead the negotiations was not inherently unreasonable because the board did not completely abdicate its role in the negotiations and the CEO had the most knowledge and experience with Plains' assets. The Court of Chancery's rejection of plaintiffs' Revlon claims in this decision exemplifies its deference to boards that act reasonably in single-bidder transactions.
In re Plains Exploration & Production Co. S'holder Litig., C.A. No. 8090-VCN (Del. Ch. Ct. May 9, 2013).