It's Right There in the Agreement
|Area||Corporate and Commercial, Mergers and Acquisitions|
Article originially published in the Canadian Lawyer Magazine, May 2019
Excerpt from "It's Right There in the Agreement":
The recent Delaware Court of Chancery decision in Vintage Rodeo Parent, LLC, et al. v. Rent-A-Center, Inc. vividly illustrated how relatively simple mechanisms in acquisition agreements can create confusion. The genesis of that case was when Vintage Capital (which owned Buddy’s, a rent-to-own retailer), entered into a merger agreement to acquire Rent-A-Center, Inc., a bigger participant in the rent-to-own space. The agreement had an “end date” provision, which permitted either party to terminate if the deal was not completed within six months. The agreement further provided that if anti-trust regulatory approval was not obtained by the end date, each party had the right to extend the end date for three months and then for a further three months. If neither party extended, the agreement wouldn’t necessarily come to an end, but either party could terminate. The merger agreement had an additional interesting feature: If Vintage chose not to extend the end date, it was required, if either party subsequently terminated, to pay an enormous US$126.5-million fee to Rent-A-Center.