Explore the Delaware Superior Court’s ruling favoring a global specialty chemical company in an M&A case involving environmental misrepresentation. Dive into the details of the $3.2 billion stock purchase agreement, the seller’s alleged fraud, and the court’s emphasis on accurate due diligence information.
M&A Stories
October 3, 2018
A global specialty chemical company based in Covington, Kentucky, recently won a legal battle against a New Jersey-based specialty chemicals maker. The case revolved around the buyer’s acquisition of the target, which operated a dyes and chemicals plant in Linden, New Jersey, from 1919 to 1991.
In 1989, a consent order was issued, making the target responsible for environmental remediation at the Linden property. Despite public records indicating ongoing off-site contamination issues, the seller assured the buyer in 2011 that all environmental concerns were resolved.
The $3.2 billion stock purchase agreement closed in August 2011, with the seller retaining the Linden property. However, on February 7, 2014, the seller revealed that additional remedial work was necessary, and New Jersey was looking to the buyer, as well as the seller, for remediation responsibility. The buyer sued the seller, alleging fraud, claiming that the seller had concealed off-site environmental problems during the acquisition.
The Delaware Superior Court allowed the buyer to pursue its fraud claim, emphasizing that sellers must provide accurate due diligence information. The court highlighted the importance of sellers’ statements during due diligence, noting that once a seller chooses to speak, they cannot lie or mislead.
The ruling serves as a reminder for sellers to disclose all relevant due diligence information. In this case, public records could have alerted the buyer to potential environmental issues, emphasizing the importance of thorough research in M&A transactions.
Case Reference:
Ashland LLC v. Heyman, C.A. No. N15C-10-176 CCLD EMD, Superior Court of Delaware (Decided: June 21, 2018).
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