West Investor Can View Documents From $5B Merger With Apollo

West Corp. must turn over documents to a shareholder regarding its $5.2 billion acquisition by private equity firm Apollo Global Management in May 2017.

The Delaware Chancery Court Dec. 29 said shareholder Mark Lavin offered a credible basis upon which to infer that West’s board may have taken improper steps in the merger.

The ruling clarifies the standard Delaware courts use to scrutinize mergers that have been approved by fully informed and disinterested shareholders. The chancery court ruled the doctrine doesn’t apply to shareholders’ books and records demands.

Applying the standard, known as the Corwin doctrine, at this early stage of the proceedings could prevent would-be shareholder plaintiffs from using their inspection rights to improve the quality of their lawsuits “in a circumstance where precise pleading, under our law, is at a premium,” Vice Chancellor Joseph Slights wrote.

Delaware allows shareholders to inspect a company’s books and records for any “proper purpose,” including investigating possible wrongdoing by officers and directors.

Golden Parachutes

Lavin said in his books and records demand that West’s directors accepted Apollo’s offer because of self-interest. Lavin said Thomas Barker, West’s chairman and CEO, received a $19 million “golden parachute” from the deal, while other directors received a $100,000 cash award in addition to accelerated vesting of restricted stock units worth about $100,000. Lavin said the company could have fetched a higher price had it been sold in segments rather than wholly to Apollo.

The West board challenged Lavin’s inspection request, saying he failed to show a credible basis that directors were conflicted in the Apollo acquisition. The board also said that because West shareholders supported the acquisition, that should end any scrutiny into the deal process.

The case is Lavin v. West Corp. , 2017 BL 466131, Del. Ch., No. 2017-0547-JRS, 12/29/17 .

To contact the reporter on this story: Yin Wilczek in Washington at ywilczek@bloomberglaw.com

To contact the editor responsible for this story: Seth Stern at sstern@bloomberglaw.com