In a recent decision, Martin Marietta v. Vulcan Materials, the Delaware Court of Chancery granted an injunction on the basis of confidentiality agreement wording that effectively prevented a hostile takeover attempt. Significantly, neither of the confidentiality agreements in question contained a standstill, the typical anti-hostile takeover provision. Rather, the fairly standard use and non-disclosure clauses formed the basis of the court’s opinion.
In this memorandum, Richards Kibbe & Orbe LLP attorneys Jahangier Sharifi, Jonathan D. Hendin and Cary M. Reiss discuss the Martin Marietta decision and the importance of carefully reviewing the language of confidentiality agreements in order to avoid unexpected restrictions on future transactions.
In its recent decision in Martin Marietta Materials, Inc. v. Vulcan Materials Co., Civ. No. 7102 (CS), 2012 WL 1605146 (Del. Ch. May 4, 2012), aff’d mem., 2012 WL 1965340 (Del. May 31, 2012), aff’d, 2012 WL 2783101 (Del. Jul. 10, 2012), the Delaware Court of Chancery enjoined Martin Marietta from pursuing a hostile takeover bid for Vulcan based on the court’s reading of two non-disclosure agreements (“NDAs”). The two NDAs in question were executed by Martin Marietta and Vulcan in connection with their earlier consideration of a negotiated transaction and neither NDA contained any provision expressly prohibiting Martin Marietta’s unsolicited bid. The court’s careful analysis in this case demonstrates that, even in the absence of express restrictions or strained interpretation, relatively standard provisions of an NDA may combine to prevent a party who has received conﬁdential information from pursuing alternative transactions related to the provider of the conﬁdential information.
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