On December 7, 2018, the Supreme Court of Delaware affirmed the Delaware Court of Chancery’s landmark ruling that Fresenius SE & Co. KGaA (“Fresenius”) properly terminated its $4.3 billion agreement to acquire Akorn, Inc. (“Akorn”). Akorn, Inc. v. Fresenius Kabi AG
, C.A. No. 2018–0300–JTL (Del. Dec. 7, 2018). As discussed in our post
on the Court of Chancery’s decision, Akorn sued for specific performance after Fresenius walked away from the deal citing the discovery of various regulatory compliance problems, which Fresenius asserted amounted to a material adverse effect (“MAE”). The Court of Chancery concluded that Akorn violated not only multiple representations and covenants in the merger agreement but also the general MAE provision, ruling that an MAE had occurred and termination of the deal was justified. Concluding that the factual record adequately supported the determination that Akorn’s breach of its regulatory representations and warranties gave rise to an MAE and that Akorn had suffered a general MAE, the Delaware Supreme Court affirmed the dismissal of Akorn’s claims.
The Court’s summary affirmance leaves unanswered a number of questions, including (i) whether events that give rise to an MAE must be unknown at the time of signing, (ii) whether the MAE analysis properly consider qualitative and quantitative factors and (iii) the appropriate standard for materiality in the breach of an “ordinary course” covenant.