United Rentals, Inc. v. Ram Holdings, Inc.

937 A.2d 810 (2007)

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Nature of the Case

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Facts

P offered itself up for sale through a draft merger agreement sent to potential buyers, including Cerberus Capital Management, L.P. ('CCM'). P entered into the Merger Agreement. D is a shell entity with de minimis assets formed solely to effectuate transactions contemplated under the Merger Agreement. Under the Merger Agreement, D committed to purchase all of the common shares of P for $ 34.50 per share in cash, for a total transaction value of approximately $ 7 billion, which includes the repayment or refinance of P's existing debt. The Merger Agreement contemplates that, in order to fund a portion of the Merger consideration, D will obtain financing through the sale of equity to CCM for an aggregate purchase price of not less than $ 1.5 billion under the Equity Commitment Letter. The signatories to the Equity Commitment Letter are CCM and D. The terms of the Equity Commitment Letter were negotiated with and accepted by P, but P is neither a party to nor a beneficiary of the Equity Commitment Letter. D contends that it communicated to D's principal attorney contract negotiator that P wanted to restrict D's ability to breach the Merger Agreement and unilaterally refuse to close the transaction. P further maintains that P's counsel made clear that it was very important to P that there be 'deal certainty' so that D could not simply refuse to close if debt financing was available. The obvious problem to that scenario was that D had no assets. It was a shell. Furthermore, CCM did issue a guarantee but only for $100 million. D consistently communicated that Cerberus had a $ 100 million walkway right and that P knowingly relinquished its right to specific performance under the Merger Agreement. The initial merger agreement was put forth, and negotiations and markups around it were exchanged between the parties. Various exchanges restored and then took away P’s ability to sue for specific performance. Various exchanges restored and then took away the $100 million limit on CCM’s liability. P wanted to make sure it could collect the full amount of the equity commitment letter in the event that D had its debt financing available but refused to close. D told P that such an arrangement was not acceptable and that CCM was unwilling to accept any exposure in the event D did not close the transaction other than payment of a fee. At a subsequent meeting, D claims P agreed to limit fees to the guarantee and no more. P claims no such agreement was made and that the July 15, 2007 drafts of the Merger Agreement, Limited Guarantee, and Equity Commitment Letter proffered by D's lawyers provide the best evidence of what, if anything, the parties had agreed to on July 12, 2007. An agreement was signed, and on November 14, 2007, D notified P that it would not proceed with the acquisition of D on the terms stated in the Merger Agreement, but would be prepared to enter into discussions with D about revised terms. D promptly rejected this 'offer' and, on November 19, 2007, filed the present lawsuit seeking specific performance of the Merger Agreement.