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Business Organizations Keyed to Allen
Omnicare, Inc. v. NCS Healthcare, Inc.
Citation:818 A.2d 914 (Del. 2003).
NCS was 80% owned by public stockholders. In 2001, NCS defaulted on its debt and began exploring opportunities to sell the company. In July and August of 2001, the NCS board rejected two acquisition proposals from Omnicare. In January 2002, Genesis entered discussions with NCS and the parties agreed on an exclusive negotiating period running through July 31, 2002. On July 26, in response to rumors about a NCS-Genesis deal, Omnicare faxed a letter to NCS offering to pay NCS debtholders in full and pay stockholders $3 per share.
NCS did not respond to Omnicare’s July 26 proposal because of the exclusivity agreement; however, it used the proposal to extract better terms from Genesis (approximately $1.60 per share and satisfying NCS debtholders in full). In exchange for better financial terms, Genesis required significant deal protection including a “force-the-vote” provision requiring NCS board to submit the proposal to shareholders even if the board no longer recommended the merger. There was also voting agreements with two directors (“acting in their capacity as NCS stockholders”) who held a majority of the voting stock agreeing to vote in favor of the merger. Genesis demanded the transaction and voting agreements be approved by July 28 or it would withdraw its offer and terminate discussions. The board approved the deal.
On August 1, Omnicare filed this action and, on August 8, made a tender offer for NCS shares at a price of $3.50 per share. On October 21, NCS’ board and financial advisors withdrew their recommendations in favor of the NCS-Genesis merger.
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