William Savitt and Ryan A. McLeod are partners at Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton firm memorandum by Mr. Savitt and Mr. McLeod. This post is part of the Delaware law series; links to other posts in the series are available here.
The Delaware Court of Chancery recently issued a post-trial opinion holding that a controller cash-out merger was “entirely fair” and appraised for a value less than half of the deal price. ACP Master, Ltd. v. Sprint Corp. C.A. No. 8508-VCL (Del. Ch. Jul. 21, 2017).
The case concerns the 2013 buyout of Clearwire by its majority stockholder, Sprint. The acquisition was part of a larger effort by Softbank to enter the U.S. cellular market, and it occurred in tandem with Softbank’s acquisition of majority control of Sprint. Sprint and Clearwire initially agreed to a buyout price of $2.97 per share, but stockholders reacted negatively to the announcement and a third party proposed a series of increasing topping bids. The bidding war concluded when Sprint agreed to raise its offer to $5.00 per share and the Clearwire committee agreed to terminate discussions with the third party. A hedge fund took a position in the stock and filed suit, alleging that the deal was the product of fiduciary breaches and arguing that the stock was worth over $16.00 per share.
