Justia.com Opinion Summary: This action arose out of the merger of Answers with A-Team, a wholly-owned subsidiary of AFCV, which in turn, was a portfolio company of the private equity firm Summit (collectively, with A-Team and AFCV, the Buyout Group). Plaintiffs, owners of Answers' stock, filed a purported class action on behalf of themselves and all other similarly situated public stockholders of Answers. The court concluded that the complaint adequately alleged that all of the members of the Board breached their fiduciary duties. Therefore, the motions to dismiss the First Cause of Action were denied, except as to the disclosure claim that plaintiffs have abandoned. The court also concluded that plaintiffs have adequately pled that the Buyout Group aided and abetted a breach of the Board's fiduciary duty. Therefore, the motions to dismiss the Second Cause of Action were denied.
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EFiled: Apr 13 2011 3:35PM EDT
Transaction ID 37019582
Case No. 6170-VCN
COURT OF CHANCERY
OF THE
STATE OF DELAWARE
JOHN W. NOBLE
VICE CHANCELLOR
417 SOUTH STATE STREET
DOVER, DELAWARE 19901
TELEPHONE: (302) 739-4397
FACSIMILE: (302) 739-6179
April 13, 2011
Jessica Zeldin, Esquire
Rosenthal, Monhait & Goddess, P.A.
919 N. Market Street, Suite 1401
Wilmington, DE 19801
Kevin R. Shannon, Esquire
Potter Anderson & Corroon LLP
1313 N. Market Street
Wilmington, DE 19801
William M. Lafferty, Esquire
Morris, Nichols, Arsht & Tunnell LLP
1201 N. Market Street
Wilmington, DE 19801
Re:
In Re Answers Corporation Shareholders Litigation
Consolidated C.A. No. 6170-VCN
Date Submitted: April 12, 2011
Dear Counsel:
Answers Corporation is the target of a takeover effort, priced at $10.50 per
share of common stock, by AFCV.1 The meeting of Answers’ stockholders to
consider the Proposed Transaction, scheduled for April 12, 2011, was announced
1
On April 11, 2011, the Court denied Plaintiffs’ motion to enjoin preliminarily the meeting at
which Answers’ stockholders would consider that offer. In re Answers Corp. S’holders Litig.,
C.A. No. 6170-VCN (Del. Ch. Apr. 11, 2011) (the “Memorandum Opinion”). Terms defined in
the Memorandum Opinion are used here. A familiarity with the factual background set forth in
the Memorandum Opinion is also presumed.
In Re Answers Corporation Shareholders Litigation
Consolidated C.A. No. 6170-VCN
April 13, 2011
Page 2
in early February 2011. On April 9, 2011, Brad D. Greenspan submitted an offer
(the “Greenspan offer”) to acquire a controlling interest in Answers for $13.50 per
share of common stock.2
The Board met on April 10, 2011, and received guidance from its financial
advisor and legal counsel. It determined that the offer was not (and was not likely
to become) a Superior Proposal as that term is defined in the Agreement and Plan
of Merger.
The Greenspan offer was rejected, and the Board reaffirmed its
recommendation that Answers’ stockholders vote in favor of the Proposed
Transaction. The Company, on April 11, filed a Form 8-K with the Securities and
Exchange Commission and included both the Greenspan offer and a statement of
its reasons for not pursuing his offer. The Company did, however, continue the
meeting of stockholders from April 12 until April 14, 2011.
The question for the Court is whether the Greenspan offer, something not
considered by the Court when it initially ruled on Plaintiffs’ motion for a
preliminary injunction, materially changed the mix of facts that informed the
2
The Greenspan offer was made on behalf of eJuggernaut LLC and Social Slingshot Pte Ltd.
The offer also included warrants.
In Re Answers Corporation Shareholders Litigation
Consolidated C.A. No. 6170-VCN
April 13, 2011
Page 3
exercise of the Court’s equitable discretion. The Plaintiffs argue that the Court
should delay the stockholders’ meeting beyond the two-day continuance imposed
by the Board in order to allow shareholders additional time to assess the import of
the Greenspan offer and to see if that offer may have stirred the interest of other
potential bidders.
They suggest that postponing the meeting, until, perhaps
April 22, 2011, is necessary in order to assure that Answers’ stockholders are
properly informed about the Greenspan offer when they vote on the Proposed
Transaction.
Although the Greenspan offer recited a price of $13.50 per share, a
purported $3 per share increase over AFCV’s offer, the Board’s judgment to reject
it cannot be seriously questioned. Among the reasons cited by the Board for the
exercise of its business judgment are: (1) substantial doubt exists as to whether the
financing necessary to carry out the Greenspan offer could be procured; (2) unlike
the certainty presented by the Proposed Transaction, timing as to the
consummation of the Greenspan offer is unclear; (3) although the Greenspan offer
purports to treat differently the Company’s preferred and common shares, there is
no explanation as to why the preferred stockholders would vote in favor of a
In Re Answers Corporation Shareholders Litigation
Consolidated C.A. No. 6170-VCN
April 13, 2011
Page 4
transaction providing added benefits to common stockholders but not available for
their shares; and (4) concern regarding the market credibility of Mr. Greenspan and
his ability to consummate a transaction of the type he has presented.
The Greenspan offer was made public by Answers on April 11. With a
continuation of the stockholders’ meeting, three days separate the public release of
the Greenspan offer and the rescheduled stockholder vote. A period of three days
has been viewed as inadequate to afford stockholders a fair opportunity to assess
new or additional material disclosures.3
Because the Greenspan offer is so
deficient, it cannot fairly be considered material to the stockholders’ decisions.4
For this reason, no further delay of the stockholders’ meeting is required.
More importantly, the terms of the Proposed Transaction have been public
since February 3, 2011. Why the Greenspan offer did not surface earlier is a
question that the Court cannot answer. Why the proponents of the Greenspan offer
3
See In re Anderson, Clayton S’holders’ Litig., 519 A.2d 669, 678-79 (Del. Ch. 1986). Some of
the opinions questioning the period between disclosure and vote were written before the arrival
of the faster communications which are now taken for granted. Whether a short period of three
days could suffice in the Internet age for the disclosure of material information need not be
resolved.
4
It seems reasonable to infer that most stockholders will become aware of the Greenspan offer in
advance of the rescheduled stockholders’ meeting because of its relatively widespread
distribution through business media (and the SEC filing).
In Re Answers Corporation Shareholders Litigation
Consolidated C.A. No. 6170-VCN
April 13, 2011
Page 5
have not appeared in this litigation is another question that the Court cannot
answer. The lobbing-in of a flimsy offer three days before the stockholders’
meeting cannot, as a general matter, be cause for an extended court-ordered delay.5
As addressed in more detail in the Memorandum Opinion, the question of
whether Answers’ stockholders should approve the Proposed Transaction is one
that can be fairly debated. This remains a matter for shareholder democracy. The
Greenspan offer is widely-known—although likely not uniformly known—by
Answers’ stockholders; ultimately, whether they know of it or not is not material
as a matter of law to their informed decision as participants in the stockholders’
meeting.6
Plaintiffs’ application for an additional delay of the Answers’ stockholders’
meeting, now scheduled for April 14, 2011, is denied.
5
See, e.g., Anderson, Clayton, 519 A.2d at 676 (“[D]irectors of a Delaware corporation have no
duty to delay an otherwise appropriate transaction just because at the last minute a possible
alternative arises . . . .”).
6
It was prudent for the Board to have postponed the meeting to allow the stockholders (and,
perhaps, the broader market) a significant opportunity to consider the Greenspan offer and to
determine for themselves if it might somehow affect how they assess the Proposed Transaction.
In Re Answers Corporation Shareholders Litigation
Consolidated C.A. No. 6170-VCN
April 13, 2011
Page 6
IT IS SO ORDERED.
Very truly yours,
/s/ John W. Noble
JWN/cap
cc: Register in Chancery-K
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