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Summary
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Secondary
buyout of private equity portfolio company
- Publisher of special interest magazines
- e.g., Popular Woodworking, Scuba Diving
Stock
purchase agreement
- Target gave standard representations
- Re: business, operations and financial statements
- Seller gave only limited representations
- E.g., owned stock being sold
- Gave officer's certificate re: accuracy of
Company and Seller representations and absence of MAE
- Buyer agreed to a non-reliance provision
- Acknowledged that it was solely relying on
contractual representations
- That there would be no liability for the Buyer's
use or reliance on any
other information
- Buyer agreed to indemnification as its sole
remedy
- Capped at 4% of purchase price
- $20 million on a $500 million deal
Buyer
alleged financials were false
- Including that practices were used to inflate
revenue
- Including that Seller (not just Target) was
complicit
Buyer
sought rescission
- Notwithstanding express terms of agreement
Court
held:
- Buyer could seek rescission for claims based on
intentional fraud by seller
- But dismissed buyer's claim for rescission based
on
negligent misrepresentation
Court
also upheld contractual choice of Delaware law
- Applied to tort claims as well as contractual
claims
- Parties were all Delaware entities
- Although parties and Target were all based in
different states
Settled
by parties
- News item
5.25.06
- Reported that Providence Equity will make an
unspecified payment to F&W in exchange for a minority stake
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Opinion Del Ch 2.14.06
SEC_CODE_REF_0090001192884
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Opinion
- Strine
Delaware Website PDF
Hyperlinked outline Background
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Facts
I
- Pre-agreement status
I.A
- Seller and Company before the sale
I.B
- Buyer discovers financials were inaccurate
I.C
Buyer's
Claims
II
- Relevant terms of the SPA
II.A
- SPA: stock purchase agreement
- Procedural Framework
II.B
Analysis
III
- Fraudulent inducement - Choice of law
III.A
- Buyer's fraud claim
III.B
- Does the SPA bar rescission?
III.C
- For intentional, fraudulent misrepresentations?
III.C.1
- Despite terms of the SPA?
III.C.2
Conclusion
IV
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Commentary
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Law
firm mailings
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Related Topics
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