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Akorn, Inc. v. Fresenius Kabi AG

Court of Chancery of Delaware

September 25, 2018, Submitted; October 1, 2018, Decided

C.A. No. 2018-0300-JTL

Opinion

MEMORANDUM OPINION

LASTER, V.C.

Pursuant to an agreement and plan of merger dated April 24, 2017 (the "Merger Agreement"), Fresenius Kabi AG agreed to acquire Akorn, Inc. In the Merger Agreement, Akorn made extensive representations about its compliance with applicable regulatory requirements and committed to use commercially reasonable efforts to operate in the ordinary course of business [*2]  between signing and closing. Both Fresenius and Akorn committed to use their reasonable best efforts to complete the merger, and Fresenius committed to take all actions necessary to secure antitrust approval, without any efforts-based qualification. The parties agreed to a contractually defined "Outside Date" for closing, set initially at April 24, 2018. If the need for antitrust approval was the only condition to closing that had still not been met at that point, then the Outside Date would extend automatically to July 24, 2018.

If the merger closed, then each share of Akorn common stock would be converted into the right to receive $34 per share. Closing, however, was not a foregone conclusion. First, Fresenius's obligation to close was conditioned on Akorn's representations having been true and correct both at signing and at closing, except where the failure to be true and correct would not reasonably be expected to have a contractually defined "Material Adverse Effect." If this condition was not met and could not be cured by the Outside Date, then Fresenius could terminate the Merger Agreement. Fresenius could not exercise this termination right, however, if Fresenius was in material [*3]  breach of its own obligations under the Merger Agreement.

Second, Fresenius's obligation to close was conditioned on Akorn having complied in all material respects with its obligations under the Merger Agreement. Once again, if this condition was not met and could not be cured by the Outside Date, then Fresenius could terminate the Merger Agreement. Here too, Fresenius could not exercise the termination right if Fresenius was in material breach of its own obligations under the Merger Agreement.

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2018 Del. Ch. LEXIS 325 *; 2018 WL 4719347

AKORN, INC., Plaintiff and Counterclaim Defendant, v. FRESENIUS KABI AG, QUERCUS ACQUISITION, INC., and FRESENIUS SE & CO. KGAA, Defendants and Counterclaim Plaintiffs.

Notice: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.

Subsequent History: Affirmed by Akorn, Inc. v. Fresenius Kabi AG, 198 A.3d 724, 2018 Del. LEXIS 548 (Del., Dec. 7, 2018)

Related proceeding at Twin Master Fund, Ltd. v. Akorn, Inc., 2020 U.S. Dist. LEXIS 18727 (N.D. Ill., Feb. 5, 2020)

CORE TERMS

merger agreement, Covenant, terminate, compliance, buyer, parties, Merger, representations, adverse effect, risks, site, seller, products, remediation, conditions, presentation, team, obligations, signing, breached, audit, cured, due diligence, investigate, estimates, Bring-Down, regulatory compliance, ordinary course, Subsidiaries, acquisition

Business & Corporate Compliance, Governments, Agriculture & Food, Federal Food & Drugs Act, Computer & Internet Law, Internet Business, Data Protection in E-Commerce Environments, Contracts Law, Defenses, Affirmative Defenses, Mergers & Acquisitions Law, Mergers, Contracts Law, Contract Conditions & Provisions, Conditions Subsequent, Breach, Nonperformance, Material Breach, General Business Considerations, Evidence, Burdens of Proof, Allocation, Weight & Sufficiency, Standards of Performance, Standards of Performance, Impossibility of Performance, Frustration of Purpose, Contract Interpretation, Intent, Breach of Warranty, Mergers, Duties & Liabilities of Directors & Officers, Affirmative Defenses, Fraud & Misrepresentation, Material Misrepresentations, Contract Interpretation, Breach of Contract Actions, Elements of Contract Claims, Antitrust