The Delaware Court of Chancery recently held that an acquisition of a company in a reverse triangular merger does not result in an assignment of contractual rights by operation of law, and accordingly, does not violate a contractual provision prohibiting assignments by operation of law.

Roche Diagnostics GmbH agreed to acquire BioVeris Corp., primarily to obtain its intellectual property rights, and structured the acquisition as a reverse triangular merger, whereby a subsidiary of Roche would merge with and into BioVeris, with BioVeris becoming the surviving entity. Plaintiff, Meso Scale Diagnostics, alleged that the Roche/BioVeris reverse triangular merger transaction violated an anti-assignment provision in a consent agreement to which it, Roche, and BioVeris were parties. Meso argued that BioVeris's licenses were transferred or assigned to Roche by operation of law and without Meso's consent, in violation of the agreement.

The Court discussed Delaware's longstanding doctrine of independent legal significance, which has been applied in situations where deals were structured so as to avoid consent rights. It also explained that Delaware courts have refused to hold that a mere change in legal ownership of a business results in an assignment by operation of law. The Court held that a reverse triangular merger is not an assignment of contractual rights by operation of law and the anti-assignment provision at issue does not require consent for changes in ownership, but only prohibits an assignment by operation of law or otherwise absent consent.

Meso Scale Diagnostics, LLC v. Roche Diagnostics GmbH, C.A. No. 5589-VCP (Del. Ch. Feb. 22, 2013).