Delaware Court Upholds Private Equity-Led Company Sale Under Business Judgment Rule
On January 7, 2025, Vice Chancellor Glasscock issued a 68-page post-trial decision in Manti Holdings, LLC v. The Carlyle Group Inc., in which he rejected plaintiffs’ claims of breach of fiduciary duty in connection with the sale of Authentix Acquisition Company, Inc. (“Authentix” or the “Company”) to private equity firm Blue Water Energy LLP (“BWE”) in […]
Jason Halper, Peter Marshall, and Sara Brauerman are Partners at Vinson & Elkins LLP. This post is based on a Vinson & Elkins memorandum by Mr. Halper, Mr. Marshall, Ms. Brauerman, and Anna Boos, and is part of the Delaware law series; links to other posts in the series are available here.
On January 7, 2025, Vice Chancellor Glasscock issued a 68-page post-trial decision in Manti Holdings, LLC v. The Carlyle Group Inc., in which he rejected plaintiffs’ claims of breach of fiduciary duty in connection with the sale of Authentix Acquisition Company, Inc. (“Authentix” or the “Company”) to private equity firm Blue Water Energy LLP (“BWE”) in September 2017. The plaintiffs, minority stockholders of Authentix, alleged that the Carlyle Group Inc. and its affiliates (“Carlyle”), as a controlling stockholder, compelled the Authentix board to approve a “fire sale” of the Company to meet its own liquidity needs coinciding with the end of the initial term of the primary Carlyle fund that acquired Authentix. The Court found that, while Carlyle was a controlling stockholder by virtue of its ownership of over 50% of the Company’s common and preferred stock (giving it voting control), and that a majority of the board was not independent of Carlyle, it did not have a disabling conflict of interest nor did it obtain a “non-ratable benefit denied” to other stockholders so as to trigger entire fairness review in connection with the “arms-length” sale to BWE. Applying deferential business judgment rule review, the Court found for the defendants after a seven-day trial in January 2024.
