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From Securities Regulation Daily, January 5, 2015

Dollar-store merger still set for shareholder vote

By Anne Sherry, J.D.

Family Dollar shareholders were denied interlocutory review of an order denying their request to enjoin a shareholder vote on a proposed merger with Dollar Tree. Dollar General had come forward as a competing bidder offering a higher per-share price, but Family Dollar declined to pursue the offer, citing antitrust concerns with the hypothetical combination. The vote on the Dollar Tree agreement is currently scheduled for January 22 (In re Family Dollar Stores, Inc. Stockholder Litigation, January 2, 2014, Bouchard, A.).

Background. Last month, the court denied the request for a preliminary injunction forestalling a vote on the proposed merger. The shareholders claimed that the board breached its Revlon duties by refusing to engage in discussions with Dollar General after it offered $80 per share for Family Dollar, compared to Dollar Tree’s bid of $76 per share. The court noted that the Dollar Tree proposal provided “deal certainty” and said that a preliminary injunction would deprive Family Dollar’s shareholders of the opportunity to decide whether the merger with Dollar Tree was the right choice. Family Dollar had been advised by counsel that Dollar General’s offer carried a 60 percent chance of rejection on antitrust grounds.

On December 23, the scheduled date for the shareholder meeting, the meeting was adjourned until January 22. On December 24, the shareholder plaintiffs filed an application for certification of an interlocutory appeal from the court’s denial of preliminary injunctive relief.

Pursuit of interlocutory appeal. Delaware Supreme Court Rule 42 allows interlocutory appeal only if the trial court order meets all of the following conditions: it determines a substantial issue; it establishes a legal right; and it meets at least one of the criteria of subparts (b)(i)-(v) of Rule 42. Among these criteria are that the question of law is of first instance in Delaware or that the decisions of the trial courts conflict on the question of law. The court did not take on the first two conditions of Rule 42; it denied the application for certification for interlocutory appeal on the grounds that none of the subparts (b)(i)-(v) criteria were met.

First, the opinion did not decide an original question of law, instead applying principles honed over the 30 years since Revlon to a certain set of facts. In particular, the court wrote, its opinion concluded that the board’s decision not to engage in discussions with Dollar General was a reasonable exercise of judgment consistent with the directors’ Revlon duties to maximize value for Family Dollar stockholders. Second, the opinion did not conflict with precedent by holding that directors need only be adequately, rather than fully, informed when deciding to reject a financially superior offer. There was no intention to draw a distinction between “fully” and “adequately” informed, and moreover, the court wrote, the plaintiffs’ argument rested on an illogical notion that a board had the duty to consider information not reasonably available to it (in this case, Dollar General’s confidential pricing data). Finally, the plaintiffs did not and could not argue that the opinion reversed or set aside a prior decision.

The case is No. 9958-CB.

Attorneys: Seth D. Rigrodsky (Rigrodsky & Long, P.A.) for Shieva Y. Stein. William M. Lafferty (Morris, Nichols, Arsht & Tunnell LLP) for Mark Bernstein. Gregory P. Williams (Richards, Layton & Finger, P.A.) for Dollar Tree Stores Inc. and Family Dollar Stores Inc.

Companies: Dollar Tree Stores Inc.; Family Dollar Stores Inc.

MainStory: TopStory MergersAcquisitions CorporateGovernance DirectorsOfficers DelawareNews

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