The Delaware Court of Chancery has refused to enjoin a proposed merger between rental car companies. The target company had engaged in unsuccessful merger negotiations with two competing rental car companies over a two-year period ending in 2009. Following the turnaround of the target company's business, the target company re-engaged in negotiations with one of its competitors that led to an agreement to merge. The merger agreement provided for (i) an all cash per share purchase price representing a 5.5% premium over the target company's per share market price; (ii) a significant termination fee payable by the acquiring company if it abandoned the merger; and (iii) a commitment by the acquiring company to make business divestitures if necessary to secure antitrust approval.
Following the merger announcement, the rental car company that had previously been engaged in negotiations with the target company objected to the merger and offered a higher share merger price. This offer, however, lacked the deal certainty of the merger agreement the target company entered into.
The court ruled that the target company's board of directors' decision to only negotiate with one of the competitors was proper. The court credited the board of directors' well-informed determinations that (i) the other competitor lacked the resources to finance a merger; (ii) a merger with the other competitor was subject to greater antitrust risk; and (iii) the merger agreement the target company entered into might be abandoned if a competitive bid was considered. This case demonstrates the court's steadfast unwillingness to enjoin a transaction when the board of directors has carefully negotiated and structured a corporate sale by means of a thorough and deliberative process.
In re Dollar Thrifty S'holder Litig. C.A. No. 5458-VCS (Del. Ch. Sept. 8, 2010)