Steven Davidoff previously did a very good overview of the issues facing Martin
Marietta. I just want to add something to the discussion of the current legal battle in Delaware. Wait a minute ...
what's a Maryland company seeking to take over a New Jersey company doing in a
Delaware court? Martin Marietta and Vulcan are now before Chancellor
Strine in Delaware arguing interpretation of a nondisclosure agreement.
Martin Marietta is seeking a declaratory judgment from the Chancery Court
that the NDA does not preclude them from undertaking a hostile tender offer for
Vulcan. Here are the
complaint, the answer, as well as the NDA in question.
Central to the Martin Marietta's argument is that the NDA
does not include a standstill agreement. Had the parties, Martin Marietta
argues, wanted to ensure that Martin Marietta be precluded from undertaking
such a transaction in the event friendly talks fell through, they could have
included the provision in the NDA, but they didn't. Martin Marietta is
asking the court to give it a declaratory judgment that the NDA does not
preclude them from pursing a hostile offer.
On the other hand, Vulcan claims that the confidential
information handed over as part of the NDA can only be used in furtherance of
the friendly transaction that the parties were contemplating when they signed
the agreement. By going hostile, and presumably relying on some of the
confidential information and disclosing the earlier talks, Vulcan argues that
Martin Marietta is in violation of the NDA. Vulcan is looking for an
injunction from the Chancellor to prevent the tender offer from going forward.
Here's the critical paragraph from the NDA:
First, Mets and Yankees? And no one thinks this
deal could possibly ever go hostile? Why not call it Yankees and Red Sox?
C'mon! Ok, there is no question that this NDA does not include
a standstill provision of any sort. It just doesn't. Now the lawyers who
negotiated the NDA know how to write standstill provisions. I'd dare say that
standstill provisions are probably in their NDA form contracts. For
whatever reason, they decided not to include a standstill in this agreement.
Why? Who knows. It really doesn't matter, does it?
Now, look at the definition of "Transaction".
Vulcan is arguing that they were negotiating a friendly deal and that any
use of Vulcan's confidential information for any purpose other than the
friendly deal is in violation of the NDA. The NDA defines
"Transaction" as "a possible business combination
transaction" between Martin Marietta and Vulcan. It doesn't read a
friendly merger, a negotiated transction, or the like...just a business
combination. I suppose a business combination transaction can be hostile
as a well as friendly. The definition of the Transaction in the NDA
certainly doesn't make it obvious that the NDA was meant to only cover a
friendly, negotiated transaction and no other.
Anyway, Vulcan is asking for Chancellor Strine to read
the minds of the parties rather than enforce what the parties have written on
paper. It seems like hard argument for Vulcan to win.
Update: Yes, I am aware that
I passed on an opportunity to offer up the "Strine engaging in a Vulcan
mind meld to figure out the intent of the parties" pun. I'll let him do
that in his opinion...
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