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LJN NewslettersNewsSectionsThe Corporate Counselor

The Timing and Substance of M&A Disclosures

BY Robert S. Reder, Peter B. Heller
February 24, 2010

Deal-makers and their legal and professional advisers often face the difficult decision of whether they are, at any point prior to signing definitive agreements, required under the federal securities laws to publicly disclose M&A negotiations. Furthermore, if those negotiations result in a signed transaction, the parties and their advisors then need to consider what information to include in the detailed proxy statement sent to target company stockholders to solicit their votes. Two recent decisions provide useful guidance concerning both the timing and substance of disclosures in the context of M&A activity.

Cases in Point

In Levie v. Sears Roebuck & Co., N.D. Ill., No. 04 C 7643 (N.D. Ill. Dec. 18, 2009), set against the backdrop of the 2005 merger between retail giants Sears and Kmart, the United States District Court for the Northern District of Illinois discussed the relevant considerations in determining whether and when disclosure of merger negotiations may be required under the federal securities laws. And, in In re 3Com Shareholders Litigation, Civil Action No. 5067-CC (Del. Ch. Dec. 18, 2009), the Delaware Court of Chancery addressed allegedly inadequate disclosures in a proxy statement sent by 3Com Corporation to solicit stockholder votes in favor of its pending acquisition by Hewlett Packard. In each case, the court sided with target company management in actions brought by unhappy stockholders.

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