The Delaware Supreme Court has upheld the Delaware Chancery Court's decision that a violation by Martin Marietta Materials, Inc. of a non-disclosure and confidentiality agreement ("NDA") and a joint defense and confidentiality agreement ("JDA", together with the NDA, the "Agreements") with Vulcan Materials Co. could be used as a basis to delay Martin Marietta's hostile tender offer of Vulcan.
Prior to discussing a potential merger between the two companies, Martin Marietta and Vulcan entered into the NDA, which, among other things, prohibited certain uses and disclosures of "Evaluation Material" exchanged by the parties for purposes of their discussions. Additionally, the companies entered into the JDA, which prohibited the disclosure of "Confidential Materials" without consent. Neither of the Agreements contained a standstill provision restricting any hostile bidder from taking actions to take over the target company for a stipulated time period. Martin Marietta ultimately decided to make an unsolicited offer for Vulcan and to pursue a proxy contest to elect four members of Vulcan's board of directors. At the same time, it sought a declaratory judgment from the Chancery Court that the Agreements were not a bar to its attempted hostile takeover. In a counterclaim, Vulcan sought an injunction, alleging the takeover attempt was in violation of the Agreements because Martin Marietta improperly used Confidential Materials and Evaluation Materials obtained through friendly negotiations and released this information in a manner that breached the Agreements.
The Chancery Court granted an injunction delaying Martin Marietta's hostile takeover bid for four months. Martin Marietta appealed the ruling to the Supreme Court on four claims of error, including that the Chancery Court (i) went beyond the plain language of the NDA, (ii) misinterpreted some of the NDA provisions, (iii) misinterpreted the JDA, and (iv) granted injunctive relief without proof of an actual injury. In affirming the Chancery Court's decision, the Supreme Court rejected Martin Marietta's arguments, finding that, despite the absence of an express standstill, the parties intended for the Agreements to cover only a negotiated transaction between the then-sitting boards of both companies, and that, the use of "Evaluation Material" for purposes other than such a consensual transaction was prohibited.
Martin Marietta Materials, Inc. v. Vulcan Materials Co., No. 254, 2012 (Del. July 12, 2012)