Document: Martin Marietta Materials, Inc. v. Vulcan Materials Co., C.A. No. 7102-CS (Del. Ch. May 4, 2012)
The Delaware Court of Chancery enjoined Martin Marietta Materials, Inc. (“Marietta”) from prosecuting a proxy contest and pursuing a hostile bid for Vulcan Materials Company (“Vulcan”) for a period of four months because Marietta breached a confidentiality agreement with Vulcan. The confidentiality agreement did not contain a standstill provision and had expired the day before the Court’s decision.
Marietta and Vulcan are industry rivals and had discussed a business combination many times over the years. In the interest of keeping their discussions confidential, Marietta and Vulcan entered into a non-disclosure agreement (the “NDA”) in May 2010. After friendly negotiations stalled, Marietta launched a hostile takeover bid and proxy contest in December 2011. In this action, Vulcan alleged that Marietta breached the NDA, inter alia, by (1) using protected information in formulating its hostile bid, (2) disclosing confidential information in public filings by unilaterally invoking an exclusion in the NDA for legally required disclosures in a manner which was inconsistent with the NDA’s notice and consent process, and (3) disclosing confidential information to journalists and financial analysts covering its hostile bid. Although the Court found the NDA to be ambiguous as to whether the actions described in (1) and (2) above were actually prohibited, the Court found in favor of Vulcan after reviewing the extrinsic evidence in the case to determine the meaning of the NDA. Next, the Court considered how to remedy Marietta’s breach of the NDA. Although the NDA did not contain a standstill provision, the Court found that the balance of the equities favored the issuance of a limited injunction—Marietta would be thwarted from running a proxy contest and its hostile bid would be delayed for some minimum period of time during which Vulcan’s protected information could not be used to forcibly effect a transaction.