On Monday, June 20, the hammer came down in the Delaware Court of Chancery on the sale of TransPerfect. Andre Bouchard, Chancellor of the Court, ruled that a so-called modified auction would be the method of sale as it “would enable both of TransPerfect’s owners, along with interested third parties to compete for the business,” according to a report by Delaware Online.
Delaware Online also reported that TransPerfect’s Phil Shawe argued the sale should be limited to TransPerfect’s current owners. Bouchard, however, said this would limit competition in the auction and not maximize shareholder value.
The reactions to the ruling by co-CEO Liz Elting and Phil Shawe could not have been more different. An article in Forbes quotes Elting as being “thrilled with this decision, which approves the very sale process I had sought―one that will not only maximize value for the stockholders but also maintain this wonderful business as an ongoing enterprise.”
Elting plans to be a “very active participant in the process,” according to Forbes.
No Basis in Reality
Asked about the decision, co-CEO Phil Shawe, meanwhile, told Slator in an e-mailed statement, “The Court of Chancery ruling is unprecedented in Delaware history. Never before has a successful and profitable company been ordered to be dissolved and force sold, over the objection of two out of three shareholders.”
“The decision also has the potential to negatively impact hundreds or thousands of jobs”―Phil Shawe, co-CEO TransPerfect
Opposing the central premise of the court ruling, Shawe said, “The idea that this is somehow a dysfunctional company threatened with irreparable harm is simply wrong and has no basis in reality.”
Shawe sees the potential for the ruling to “negatively impact hundreds or thousands of jobs” and told Slator he stands by his USD 300m cash offer to buy out Elting.
What’s Next
According to the same Delaware Online article, “an order finalizing the auction is expected to be issued by July 1.” But the auction will not kick off just yet. In his comments to us, Shawe was adamant that he “will fight this ruling in the (Delaware) Court of Appeals” and said he is confident about winning.
An appeal would keep the company in limbo for several more months. According to the Delaware Supreme Court, “In the majority of cases, the Court will issue a final written decision within 90 days after the submission date.” Yet preparing and filing the appeal will take time too.
If the auction does proceed, the court-appointed custodian, Delaware attorney Robert Pincus, would be given a very broad mandate. The Forbes article pointed out that Pincus would have “discretion over approving the bidders who can participate, selecting winners, implementing incentive plans for retaining key employees and nearly all other aspects of the auction.”
PR Offensive Underway
As the case makes its way through the courts, a PR offensive is underway to try to change the rules of the game. In a statement e-mailed to Slator by Patrick Muncie, a group named Citizens for Pro-Business Delaware, which claims to have 1,200 members, slammed the ruling as “destructive” and vowed to “end this dangerous loophole.” Muncie is a representative of campaign management firm Tusk Strategies and former Deputy Director of Communications at the New York County District Attorney’s Office.
Influencing the outcome of the case by lobbying legislators will not be easy, however. Delaware House Minority Leader Daniel Short told Delaware Online that “The Chancery Court is using the tools available to it under Delaware law to untangle a knot TransPerfect tied for itself.”
Slator reached out to the law firm representing Liz Elting but has not received a response as of press time.
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