Delaware Court Refuses to Enjoin Closing of Dollar Thrifty Merger: Court of Chancery Finds That a Well-Informed and Properly Motivated Board May Enter Into a Binding Merger Agreement Without Conducting a Pre-Signing Market Check

Sullivan & Cromwell LLP - September 16, 2010
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In a decision issued September 8, 2010, the Delaware Chancery Court in In re Dollar Thrifty Shareholder Litigation (Strine, V.C.) refused to enjoin a proposed acquisition of Dollar Thrifty Automotive Group, Inc. (“Dollar Thrifty”) by Hertz Global Holdings, Inc. (“Hertz”), holding that plaintiffs had established neither a likelihood of success on their claim nor a balance of the equities favoring injunctive relief. Vice Chancellor Strine concluded that the Dollar Thrifty board complied with its fiduciary duties under Revlon v. MacAndrews & Forbes Holdings, Inc. when it agreed to the proposed merger without a pre-signing market check, and that the board acted reasonably in agreeing to a fairly priced transaction with customary deal protections. The court also agreed that the board of Dollar Thrifty could reject a nominally higher, but more uncertain, topping bid from rival Avis Budget Group, Inc. (“Avis”). The decision confirms that there is no single roadmap that must be followed by an independent board to comply with its fiduciary duties under Revlon, and a board may properly negotiate a change of control transaction with a single bidder subject to a post-signing market check. Vice Chancellor Strine also provides useful guidance on the importance of deal certainty, market premiums and deal protection provisions when evaluating a board’s compliance with its Revlon duties.