The Delaware Court of Chancery's recent decision in In Re Bioclinica(1) made clear that a target board's reliance on a "weak" fairness opinion is not an independent violation of the board's Revlon duties and will not be evaluated by the Delaware courts in isolation from the sale process generally. In an earlier ruling in Koehler v NetSpend – in the context of a single-bidder sale process – the court found that the NetSpend board's reliance on a "weak" fairness opinion was insufficient to show that the NetSpend board had fulfilled its fiduciary duties to be knowledgeable about NetSpend's value. Citing NetSpend, the plaintiffs in Bioclinica alleged that the Bioclinica board violated its fiduciary duties in the Bioclinica sale by relying on a fairness opinion alleged to be weak because it was based on allegedly inflated capital expenditure estimates. The court granted the defendants' motion to dismiss, finding that the Bioclinica sale process, taken as a whole, was entirely reasonable because of the following:
- The bankers conducted a thorough market check.
- The sale process was administered by an independent committee and was backed up by a fairness opinion.
- The directors were informed of their fiduciary duties.
- The sale process resulted in a 25% premium over the stock price.
- Eighty-eight per cent of stockholders tendered their shares to the winning bidder.
- There was no evidence that the board had left itself in the dark about potential bidders by unnecessarily failing to waive "don't ask don't waive" standstills.
- There were no well-pled facts indicating that management controlled the board.
- There were no well-pled facts indicating that the board favoured the winning bidder.
- The deal protection devices put in place (eg, a poison pill) were ones that the court has regularly upheld.
In distinguishing NetSpend, the court noted that the NetSpend defendants were found to have conducted an insufficient single-bidder process while relying on a fairness opinion analysis in which the discounted cash-flow analysis implied values much higher than the sales price. The court clarified in Bioclinica that a board's reliance on a "weak" fairness opinion is relevant where the fairness opinion provides the only equivalent of a market check, as was the case in NetSpend, but not in Bioclinica.
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