Court of Chancery Discusses "Best and Final" Offer
Air Products & Chemicals, Inc. v. Airgas, Inc., C.A. No. 5249-CC (January 20, 2011)
This is another decision in the Airgas takeover battle. In this decision, Chancellor Chandler addressed Air Products' motion to compel Airgas' compliance with the protective order and Airgas' motion in limine to preclude Air Products from offering evidence that its $70 offer was indeed its "best and final" offer. With respect to the motion to compel, Air Products sought to reduce Airgas' designation of large chunks of deposition testimony and documents as "Litigators' Eyes Only" ("LEO"). The Court found that Air Products was itself somewhat responsible for the large designation of deposition testimony as LEO since it had not segregated LEO and non-LEO subject matter when deposing Airgas witnesses. The Court ordered Air Products to indicate the testimony that it did not believe should be LEO and then Airgas to respond within 5 hours of receipt of each transcript. Additionally, the Court ordered Airgas to produce a non-LEO version of an institutional shareholder letter setting forth that shareholder's opinion of the fair value of Airgas based on publicly available information. Finally, the Court refused to order Airgas to re-review documents previously produced and designated LEO given the rapidly approaching supplementary evidentiary hearing, but held Air Products could specify LEO documents it thought should be de-designated.
In its motion in limine, Airgas sought to preclude Air Products from offering documentary evidence that its $70 offer was its "best and final" offer because it had refused to produce internal analyses or valuations that the Air Products board relied upon in deciding to make its $70 offer. The Court had previously ordered in a December 23, 2010 opinion that the parties conduct limited discovery on Air Products' "best and final" offer. This discovery was limited to documents relating to the decision to make the final offer and limited depositions of people directly involved with that decision. The Court rejected Airgas's reliance on cases where defendants blocked discovery on privilege grounds to support its motion in limine. According to the Court, those cases involved situations where a party shielded evidence and then relied on that evidence at trial to meet its burden of proof on an issue central to resolution of the case. Air Products' characterization of its $70 offer was not an issue central to resolution of the case. Resolution of the case would depend upon whether Airgas' board had a good faith, honest belief that the $70 offer posed a "threat" to Airgas. The Air Products board's knowledge of Air Products' internal valuations of Airgas was not relevant to that inquiry. The Court was careful to point out, however, that there could be circumstances where a buyer's view of a target's value might be relevant to a fairness inquiry. In this case, Air Products was not required to prove the fairness of its offer or whether the offer was more or less than its internal valuations of Airgas. Accordingly, the Court the denied Airgas' motion in limine.
Significantly, the Court held that Air Products' public announcement of its $70 offer as its "best and final" offer meant Air Products had irrevocably represented to the Court it would not seek judicial relief for any additional offers. Bidders should keep this in mind when characterizing offers as "best and final".