In a comprehensive, 153-page ruling, Chancellor Chandler (say that 5 times real fast) provides a detailed overview of the responsibilities of a target board when faced with a structurally non-coercive, all-cash, fully financed hostile takeover. In his opinion in Air Products and Chemicals, Inc. v. Airgas, Inc. (Civil Action No. 5349-CC and Civil Action No. 5256-CC, February 15, 2011), Chandler almost begs the Delaware Supreme Court to overrule him. He feels compelled, however, to rule in light of Delaware precedent that so long as the target board meets the 2-prong test of Unocal(legally cognizable threat to the corporation and a reasonable response proportionate to the threat) it has the power to defeat what it perceives to be an inadequate offer without giving the shareholders an opportunity to decide for themselves. On several occasions he implies that he is not happy with that conclusion, but feels obligated to follow precedent in reaching it.
While the length of the opinion is daunting, it is well worth the read. The events of leading up to the decision, including the shareholders tossing out 3 incumbent directors and replacing them with Air Products nominees who then side with the rest of the board in rejecting Air Products' offer and the attempt by Air Products to shorten the time between annual meetings so it could replace the directors serving staggered terms quicker, are unique. And the Chancellor's opinion thoughtfully and carefully outlines the case law on hostile takeovers, particularly poison pills and their proper place in corporate governance.
- Marc Ward