In C&J Energy Services, Inc. v. City of Miami General Employees’ and Sanitation Employees’ Retirement Trust, C.A. No. 655/657, 2014 (Del. Dec. 19, 2014) (Strine, C.J.), the Delaware Supreme Court reversed the Delaware Court of Chancery’s decision to (1) enjoin the stockholder vote on a merger between C&J Energy Services, Inc. (“C&J”) and a division (Nabors CPS) of Nabors Industries Ltd. (“Nabors”) for 30 days, and (2) require C&J to shop the company during the injunction period. The Chancery Court determined that the C&J board’s decision to forego actively shopping the company in favor of a passive, post-signing market check constituted a plausible breach of its Revlon obligations. On appeal, the Delaware Supreme Court found that the Chancery Court erred by: (1) applying an improper standard for a preliminary injunction, (2) holding that a company must affirmatively shop itself under Revlon absent possessing “impeccable knowledge” of the market, and (3) issuing a mandatory injunction on a preliminary record.
This action arose from the proposed acquisition by C&J of a subsidiary of Nabors, which contained the assets of Nabors’ CPS division, for $2.86 billion. To gain favorable tax treatment, Nabors will retain a majority interest (53%) in the entity surviving the merger (“New C&J”), and New C&J will be domiciled in Bermuda. C&J’s stockholders will own the minority interest. To mitigate the loss of control, a supermajority vote of New C&J’s stockholders will be required to effect major corporate actions. In addition, C&J stockholders will have the right to (1) designate a majority of the members of New C&J’s board, and (2) receive the same pro rata consideration as Nabors in any subsequent sale of New C&J. C&J’s current Chairman, CEO and chief negotiator, Joshua Comstock, also negotiated for the right to be New C&J’s CEO at a higher compensation level.