In the sale of public companies to private equity purchasers, the Delaware Chancery Court has upheld the validity of board decisions to forego a public auction or pre-agreement market check. The Court has stated that post-agreement "go-shop" provisions are appropriate.
The case In re The Topps Company Shareholders Litigation, decided on
A majority of the Topps board of directors decided not to conduct another auction for the company prior to entering into an agreement. The merger agreement contained a post-agreement go-shop provision that authorized Topps to solicit alternative bids for 40 days after executing the merger agreement. Topps was allowed to consider unsolicited superior proposals after expiration of the go-shop.
Topps competitor, The Upper Deck Company (Upper Deck), became a potential bidders, and was asked to sign a confidentiality agreement containing a standstill agreement. Later, the Topps board again decided not to pursue the Upper Deck proposal.
The Chancery Court found that the board's decision not to conduct a full auction for the company was reasonable given the fact that Topps had conducted an auction for a portion of its business earlier without success, that some board members publicly discussed a sale of the company, with no acceptable bidders.
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