Opinion ID: 1497598
Heading Depth: 1
Heading Rank: 18

Heading: Structure of Transaction

Text: The Court of Chancery carefully examined the structure of the transaction. Cinerama argues that the MAF transaction was unfairly structured because it unquestionably `inhibited ... alternative bids'. It contends that the transaction was locked up, included a no-shop provision, and gave Technicolor no out, i.e., no right to terminate. Cinerama's contention that the merger agreement left Technicolor with no out is contradicted by the testimony of Technicolor's special legal counsel: As negotiated out, either the purchaser or Technicolor could terminate if [the merger] hadn't happened by March 31, 1983. And the effect of that was that if MacAndrews wasn't able to complete the acquisition for whatever reason, either its own inability or because a better offer had come along so no shareholders tendered into the MacAndrews offer, then all restrictions on Technicolor would be off if Technicolor terminated the merger agreement because MacAndrews didn't complete it by March 31, 1983. Technicolor's negotiation of these structural concessions demonstrates that the directors did not seek to foreclose competing bids. Cinerama's assertion that the merger agreement included a no-shop clause that inhibit[ed] [the] board's `ability to negotiate with other potential bidders' is not supported by the record. Although it is true that Technicolor could not shop for competing bids, it successfully preserved its right to provide information to, and engage in discussions with, competing bidders. [27] The Court of Chancery concluded on remand that the MAF transaction was not locked up by any device except its very high price. [W]hile I did conclude that the deal was probably locked up, if the value of the company at that time was or appeared to be remotely close to the value Cinerama claimed at trial, any lock-up arrangement present would not have created an insuperable financial or legal obstacle to an alternative buyer. Indeed the conclusion that the transaction was probably locked up was logically and actually premised upon the belief that the $23 price was high. Cinerama, 663 A.2d at 1140-41. The Court of Chancery's conclusion is supported by several scenarios subsequently reported in this Court's jurisprudence regarding contests for corporate control. See, e.g., Paramount Communications, Inc. v. QVC Network, Inc., Del.Supr., 637 A.2d 34, 39 (1994) (QVC made a competing bid, supported by a successful injunctive suit, despite Viacom/Paramount no-shop clause, a $100 million termination fee, and an option agreement); Paramount Communications, Inc. v. Time, Inc., Del. Supr., 571 A.2d 1140, 1146-47 (1990) (share exchange agreement, dry up agreement and no-shop clause did not prevent Paramount's hostile bid).