Document: In re Ness Technologies, Inc. S’holders Litig., C.A. No. 6569-VCN (Del. Ch. Aug. 3, 2011)
The Delaware Court of Chancery confirmed that a conflict transaction negotiated by a fully functioning special committee would not be second-guessed by the Court. This decision involved a putative class action lawsuit filed by stockholders of defendant Ness Technologies (“Ness”), who sought to enjoin a proposed transaction through which Ness’s largest stockholder, defendant Citi Venture Capital International (“CVCI”), would acquire Ness in a cash transaction at $7.75 per share. The Plaintiffs challenged the transaction on both price and process grounds and also alleged that the disclosures by Ness relating to the proposed transaction were inadequate. The Court found that the plaintiffs had not articulated sufficiently colorable price or process claims to justify expedition where: (1) the transaction had been approved by a disinterested special committee following an eleven-month sales’ process involving approximately thirty bidders; and (2) the parties merger agreement contained “relatively mundane” deal protection measures (standard “no-shop” and “no talk” provisions with fiduciary-outs and a termination fee amounting to 2.72 % of the transaction price). However, consistent with recent decisions emphasizing the importance of financial advisor independence, the Court granted the plaintiffs’ motion to expedite on the limited issue whether Ness’s financial advisor was conflicted due to past, present or future dealings with CVCI.