In re Anaplan, Inc. Stockholders Litigation, C.A. No. 2022-1073 (Del. Ch. June 21, 2024) (Cook, V.C.)

In this decision, the Court of Chancery applied the principles set forth in Corwin v. KKR Financial Holdings LLC to dismiss plaintiff’s claims for breach of fiduciary duty and waste.  The plaintiff’s claims arose from actions by officers and directors that breached interim operating covenants of a merger agreement and required renegotiating the deal with the acquirer, costing stockholders approximately $2.25 per share.  Though the plaintiff attacked those actions from a variety of angles, stockholders still had approved the deal, and the Court held that the plaintiff had not pled that the stockholders’ vote was coerced and uninformed. 

Lead plaintiff, Pentwater Capital Management LP (“Plaintiff”), was a former stockholder of Anaplan Inc. and brought suit alleging that six of Anaplan’s former directors and officers (“Defendants”) breached their fiduciary duties by issuing too many equity grants in violation of a merger agreement between Anaplan and Thoma Bravo. Plaintiff alleged that Anaplan lost $400 million in the merger because the parties had to renegotiate the merger agreement, leading to a reduction in the sale price of the shares.  Anaplan submitted a revised merger agreement (“Revised Merger Agreement”) to its stockholders, who voted to approve the transaction.

After engaging with multiple bidders, Anaplan entered into a merger agreement with Thoma Bravo on March 20, 2022 (“Original Merger Agreement”). Thoma Bravo agreed to acquire Anaplan for $66.00 per share, translating to approximately $10.7 billion for Anaplan’s stockholders. In the Original Merger Agreement, the companies agreed to interim operating restrictions that required Thoma Bravo’s consent for certain issuances, and set a dollar amount cap on the issuances. Although the Company obtained Thoma Bravo’s consent for some equity grants, it subsequently issued equity beyond the value of the cap without Thoma Bravo’s consent. This breach caused the parties to cut a new deal.  In the Revised Merger Agreement, Thoma Bravo agreed to acquire Anaplan for $63.75 per share (decreasing the amount Anaplan stockholders would receive by approximately $400 million), and the parties waived or limited certain closing conditions, limited the time for asserting breaches, and increased the reverse termination fee Thoma Bravo would pay from $586 million to $1 billion.

Plaintiff alleged that Defendants’ bad faith or grossly negligent misconduct that breached the Original Merger Agreement and caused the $2.25 drop in price per share was a breach of fiduciary duty. Plaintiff argued that, alternatively, Defendants had a continuing Revlon duty to obtain and maintain the highest price reasonably available for the company’s stockholders in the merger.

The Court described the issues and arguments presented as interesting, but even if they could establish a claim under Delaware law the claim would fail under Corwin principles. 

For Corwin’s fully informed analysis, Plaintiff argued that the Anaplan stockholders lacked material information.   The Supplemental Proxy identified “[i]mmediately up front in the Supplemental Proxy” that the board believed it was acting in good faith, and its view that a bona fide dispute had arisen with Thoma Bravo regarding compliance with the Original Merger Agreement, and then provided “eight pages laying out in substantial detail” the dispute and subsequent negotiations.  Although a plaintiff bears the burden to plead a disclosure violation, the plaintiff in the case put no finer point on the allegedly missing material information in response to this detail that the defendants described in briefing. The Court believed the Board’s beliefs about the dispute were “readily understandable” to stockholders, and “[s]tockholders would further understand that, rather than continue to dispute the issue and risk losing the deal, the Board made the business judgment that it was in the best interests of Anaplan and its stockholders to agree to a price reduction in return for securing the still-premium transaction and enhanced closing certainty.” The stockholders thus had the material information they needed to make an informed decision.

For Corwin’s coercion analysis, the Court held that neither Plaintiff’s situational coercion nor its structural coercion arguments held up. There was no situational coercion because stockholders were still receiving a premium deal. The choices before the stockholders were not so unattractive as to leave them with no choice but to vote for the merger, as voting against the merger would still leave stockholders with “an interest in a multibillion-dollar company with significant revenue,” and “[t]he difference between good, better, and best here is not grounds for situational coercion.” As for structural coercion, the vote was not structured in such a way as to influence stockholders to vote based on extraneous considerations. Corwin and its progeny, however respects stockholders’ “fully informed decision to cash out their shares for a premium via a merger and accords that decision cleansing effect rather than labeling it coercion,” and Plaintiff’s argument to the contrary had to be rejected because they “seem[ed] to suggest that corporations and our courts, have been missing structural coercion inherent in merger votes for nearly a decade.”

Finally, the Court dismissed Plaintiff’s waste claim. Plaintiff alleged that Defendants’ breaches forced stockholders to give up value for nothing in return, but the Court noted that the Revised Merger Agreement “delivered stockholders $10.4 billion in cash, representing a 41% premium over Anaplan’s five-day weighted average stock price before the Original Merger Agreement was announced.” The Court held that to reach the high and rarely satisfied threshold for a waste claim in Delaware, Plaintiff would have had to argue that the company “literally . . . g[o]t nothing whatsoever for what it gave,” and here, the closing certainty, premium price, and increased termination fee were “not ‘literally nothing.’”

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