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Essendant Genuine Parts Merger Agreement

9.4.2021

The recent decision of the Delaware Court of Chancery, Genuine Parts Company v. Essendant Inc.,1, is a useful reminder that the Delaware courts will apply the clear and clear conditions of a merger agreement and will consider the contractual interpretation issues of a dismissal application if it considers that the contractual terms are clear and clear. In Essendant, the Tribunal rejected the defendant`s application for release and found that (i) originalparts Company (“GPC”) had reasonably guaranteed that the termination costs contained in the merger agreement were not the exclusive replacement for the termination; (ii) GPC did not renounce its violation of contractual rights by accepting the termination tax; and (iii) GPC provided sufficient facts to support a reasonable claim that the exclusivity provision in the merger agreement between the parties was an essential clause. This decision once again underscores the need for the parties, in the negotiation and development of a contract, to ensure that the provisions of the treaty reflect their understanding of the agreements they have entered into. 2 In particular, Mr. Essendant asked that parties who limit recovery to the terms of the termination royalty scheme should carefully develop detailed termination royalty provisions that clearly and unambiguously express the intentions of the parties. Essendant also points out that the acceptance of a termination fee by a party does not prevent that party from claiming an action for breach. GPC filed its complaint on October 10, 2018, in which it invoked the breach of Essendant`s contract of participation in ongoing discussions with Sycamore, the termination of the agreement on the basis of a lower quality proposal, Sycamore`s non-obligation to enter into a confidentiality agreement with conditions at least as restrictive as the provisions contained in the GPC confidentiality agreement and , and the failure to respect the best reasonable efforts to end the merger with SPR. , 2019, pursuant to Rule 12, point b) 6), on the grounds that the termination tax is the only recourse under the agreement and that GPC has not adequately invoked contracts not related to the assignment of the contract. As announced on April 12, 2018, GPC has reached a final agreement regarding the merger of our S.P. Richards business with Essendant. We are confident that combining the best elements of the two companies will create an even stronger company, able to seize opportunities to create added value for all our stakeholders. We continue to make progress in our integration planning and continue to commit to closing this transaction, which is expected to be completed by the end of 2018.

Three days later, on 7 May, GPC Essendant indicated that, in its view, Sycamore`s second proposal was not a superior proposal and would not succeed and warned Essendant that further negotiations with Sycamore would be contrary to the non-invitation clause of the agreement. In support of its position, GPC referred to an interim cash flow analysis, which indicated that the implied share prices of Essendant resulting from the Sycamore proposal were significantly lower than the share prices that would result from the SPR merger. GPC also indicated that antitrust authorities would likely not allow a transaction with Sycamore, as their proposal would be seen as an attempt to protect Sycamore`s investment in Staples from the effects of a merger between SPR and Essendant. Despite its opposition to the Sycamore proposal, GPC concluded its response by proposing to pay an additional $4 per share to Essendant shareholders in the form of a conditional value right.

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