Gail Weinstein is a Senior Counsel, Steven J. Steinman is a Partner, and Steven Epstein is Managing Partner, at Fried, Frank, Harris, Shriver & Jacobson LLP. This post is based on a Fried Frank memorandum by Ms. Weinstein, Mr. Steinman, Mr. Epstein, Philip Richter, Randi Lally, and Mark H. Lucas, and is part of the Delaware law series; links to other posts in the series are available here.
In Manti v. Authentix, minority stockholders of Authentix Acquisition Corp. (the “Company”) challenged the $87.5 million sale of the Company by private equity firm The Carlyle Group to private equity firm Blue Water Energy, LLC (the “Merger”). In an earlier decision in the case—issued seven years ago at the pleading stage of litigation—the court had found that the Merger potentially was a conflicted-controller transaction in which Carlyle had received a non-ratable benefit based on the liquidity needs of its soon-to-expire fund (the “Fund”) that had invested in the Company. The court had, therefore, at the pleading stage, declined to dismiss the Plaintiffs’ claims; and held that the entire fairness standard of review presumptively applied and Carlyle and its representatives on the Company’s board may have breached their fiduciary duties by causing a quick sale to coincide with expiration of the Fund’s term. Now, seven years later, the court, in a post-trial decision issued January 7, 2025, concluded instead that the Merger was not a conflicted-controller transaction. Therefore, business judgment review applied and the case was dismissed.
