January 26, 2022

Noble Energy’s $5 Billion Chevron Deal Beats Investor Challenge


Noble Energy Inc.'s ex-board dodged litigation over its $5 billion sale to Chevron Corp., when a Delaware judge ruled Wednesday that the investors who approved the deal were told enough about it to make an informed choice.

Vice Chancellor Sam Glasscock III dismissed the case from Delaware's Chancery Court, saying any fiduciary breaches in the run-up to the merger were "cleansed" by the shareholder vote. He rejected claims that Noble's former board withheld important information from investors.

Although the board allegedly spurned a $6 billion proposal for only some of Noble's assets, there was nothing "material" to tell investors about, because that offer was "remote in time"—two years earlier—and was never seriously considered, Glasscock found.

It also wouldn't have been relevant to investors mulling the deal that Noble's senior leaders may have engineered it to get "change in control" benefits for themselves after restructuring their compensation packages in that direction during the pandemic, the judge said.

"While the timing and rationale for the board action were not themselves disclosed," the "precise payments that named executive officers would receive if the stockholders approved the merger were set forth," he wrote. "The timing and rationale for the payments was not material."

Glasscock explicitly declined to rule one way or the other on claims that the circumstances surrounding the change-in-control payments had amounted to self-dealing by company leaders.

Instead, he found that it doesn't matter whether Noble's board or management had breached fiduciary duties in the first place, because investors were ultimately given all the information they needed.

"Directors need not provide exhaustive information in seeking a stockholder vote; caselaw requires accurate and complete disclosure of material information," the judge wrote, placing emphasis on the word "material."

The undisclosed $6 billion proposal by another suitor "was unsolicited, made in mid-2018, and predated" the pandemic, the judge noted. It "contemplated an entirely different transaction structure" that was "never entertained by management or the board," he wrote.

The board also wasn't required to go out of its way to flag every potential implication of the "amended compensation plan," which included the change-in-control payments, Glasscock said.

"The only facts pertaining to the amended plan that were material were the dollar-value payments," which "the plaintiffs have conceded were included in the merger proxy," he wrote. "The incentives for management associated with those payments were apparent."

The Noble ex-board was represented by Morris, Nichols, Arsht & Tunnel! LLP and Mayer Brown LLP. The plaintiffs were represented by Cooch & Taylor PA and Monteverde & Associates PC.

The case is Galindo v. Stover , Del. Ch., No. 2021-0031, 1/26/22.

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