In Re Del Monte Foods Co. Shareholders Litigation
25 A.3d 813
| Del. Ch. | 2011Background
- Del Monte entered into a $5.3 billion LBO merger with Blue Acquisition Group, led by KKR, Centerview, and Vestar; Del Monte stockholders would receive $19 per share in cash.
- Plaintiffs sought a preliminary injunction against the stockholder vote due to alleged fiduciary breaches and undisclosed conflicts involving Barclays, Del Monte's financial advisor, and its buy-side financing for KKR.
- Barclays secretly pursued a buy-side role, concealed its intent to provide financing to a KKR bid, and facilitated a pairing of Vestar with KKR despite confidentiality constraints.
- Barclays paired Vestar with KKR in September 2010, undermining competition, and later sought to be one of KKR's lead banks, creating a direct conflict of interest.
- Del Monte adopted a single-bidder strategy with KKR, authorized Barclays to re-engage as advisor, and a go-shop period followed, ending with a definitive Merger Agreement and termination provisions.
- The Proxy Statement (Schedule 14A) contained undisclosed Barclays misconduct, leading to a February 4, 2011 Proxy Supplement that mooted some disclosure claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether directors breached fiduciary duty by Barclays-related conflicts | Barclays' self-interest tainted process; directors failed adequate oversight. | Board acted within enhanced scrutiny, relying on advisors in a good-faith process. | Yes; director breach shown; injunctive relief warranted against vote. |
| Whether KKR aided and abetted the fiduciary breaches | KKR knowingly participated with Barclays in the conflicted process. | Arms'-length negotiations normally do not support aiding and abetting; stance remains uncertain. | Yes; KKR knowingly participated and aided breaches. |
| Whether a preliminary injunction delaying the merger vote is appropriate | A 30–45 day delay would cure taint and restore process fairness. | Del Monte already engaged in active market checks; a long delay harms stockholders. | Yes, but for 20 days only, with protections on certain deal provisions. |
Key Cases Cited
- Mills Acquisition Co. v. Macmillan, Inc., 559 A.2d 1261 (Del. 1989) (injunction appropriate when board was misled by conflicted management)
- QVC Network Inc. v. Dieckman, 637 A.2d 34 (Del. 1994) (enhanced scrutiny requires directors to show reasonable process and best-value pursuit)
- Toys 'R' Us, Inc. S'holder Litig., 877 A.2d 975 (Del. Ch. 2005) (conflicted banker conflict considered; potential guidance on buy-side involvement)
- ACE Ltd. v. Capital Re Corp., 747 A.2d 95 (Del. Ch. 1999) (ACE factors for enforcing contract rights when fiduciary breach is present)
- In re Walt Disney Co. Deriv. Litig., 906 A.2d 193 (Del. 2006) (fiduciary duties and disclosure considerations in derivative contexts)
- In re Cogent, Inc. S'holder Litig., 7 A.3d 487 (Del. Ch. 2010) (irreparable harm and go-shop/disclosure dynamics in sale processes)
- Dollar Thrifty S'holder Litig., 2010 WL 3503471 (Del. Ch. 2010) (go-shop and damages considerations in Revlon-era contexts)
- Mercier v. Inter-Tel (Del.), Inc., 929 A.2d 786 (Del. Ch. 2007) (subjective component of enhanced scrutiny requires proper motives)
- Reis v. Hazelett Strip-Casting Corp., 2011 WL 303207 (Del. Ch. 2011) (contextual framework for enhanced scrutiny standard)
- La. Mun. Police Empls.' Ret. Sys. v. Crawford, 918 A.2d 1172 (Del. Ch. 2007) (disclosure-based injunctions and market risk considerations)