Mergers & Acquisitions

Del. Chancery Court OKs Airgas Poison Pill, Finds Board's Actions in Accord with Biz Judgment Rule

In a much-watched corporate case, the Delaware Chancery Court today OK’d the so-called poison pill strategy successfully utilized by Airgas Inc. to fend off a hostile takeover attempt by Air Products & Chemicals Inc. for the past year.

At issue in the unusually lengthy corporate battle was whether the decision-making power about accepting a takeover offer at some point shifts from a corporation’s board to its shareholders, according to Dow Jones Newswires (sub. req.) and the Wall Street Journal (sub. req.).

However, the “power to defeat an inadequate hostile tender offer ultimately lies with the board of directors,” ruled Chancellor William Chandler III, the court’s chief judge. While a company doesn’t have a right simply to say no indefinitely to an acquisition offer, the board’s decision-making power will be respected so long as it acts in good faith and in accord with its fiduciary duty.

“As this case demonstrates,” he writes, “in order to have any effectiveness, pills do not—and cannot—have a set expiration date,” reports Reuters.

The DealBook blog of the New York Times provides a link to the 158-page opinion.

Additional and related coverage: “Court OKs Cravath Role in Takeover Bid re Ex-Client; Proof of ‘Extreme’ Ethics Misstep Lacking”

Allentown Morning Call: “Air Products drops Airgas takeover after court setback”

Associated Press: “Delaware judges upholds Airgas poison pill plan, Air Products withdraws tender offer”

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