ACHIEVEMENTS

FEATURED
CASES

Court Holds Kessler Topaz's Challenge of Conflicted Energy Tie-Up Should Proceed

Kessler Topaz recently defeated efforts to dismiss litigation regarding Delek US Holdings, Inc. (“Delek”) and its 2017 squeeze-out of the public investors in Alon USA Energy, Inc. (“Alon”).

Delek had become Alon’s controlling stockholder in 2015 when it purchased 48% of Alon’s common shares in a block sale from Alon’s then largest shareholder, Alon Israel. In that sale, Delek paid approximately $16.99 per Alon share. Ordinarily, Delaware law would prohibit Delek from acquiring the rest of Alon for a period of three years once Delek acquired an ownership stake that large. But instead, Alon’s board of directors approved the sale and shortened the statutory period from three years to one year. During that one year period, Delek was contractually required to not seek to acquire the remaining shares of Alon stock. However, after the merger of Alon into Delek was announced on January 3, 2017, the proxy revealed that almost immediately upon Delek’s block purchase of Alon stock, discussions ensued regarding a potential combination of the two companies.

In fact, the proxy demonstrated that Alon’s board of directors immediately formed a special committee to evaluate an eventual combination of Alon and Delek. For months, the chairman of that special committee chased Delek for a deal, repeatedly bidding against itself. Ultimately, a merger was agreed to at an exchange ratio of 0.504 shares of Delek stock for each share of Alon stock, reflecting a value of $12.13 per Alon share, a significant discount to what Delek had paid for its initial stake.

Believing the terms of the merger were the result of an unfair process and undervalued Alon’s common stock, Kessler Topaz initiated litigation alongside Delaware co-counsel in 2017. Defendants moved to dismiss the action in July 2018.

The Court of Chancery denied defendants’ motions to dismiss on June 28, 2019. Nearly all of the claims asserted by Kessler Topaz survived. Also, because substantive merger negotiations began in the one-year period where Delek was contractually required to not seek to acquire the remaining shares of Alon stock, the Court of Chancery sustained plaintiffs’ statutory claims that the merger was invalid under Delaware law. This case is now set to move forward into discovery where Kessler Topaz will seek to prove that the merger was unfair for all of Alon’s former minority shareholders.

Kessler Topaz recently defeated efforts to dismiss litigation regarding Delek US Holdings, Inc. (“Delek”) and its 2017 squeeze-out of the public investors in Alon USA Energy, Inc. (“Alon”).

Delek had become Alon’s controlling stockholder in 2015 when it purchased 48% of Alon’s common shares in a block sale from Alon’s then largest shareholder, Alon Israel. In that sale, Delek paid approximately $16.99 per Alon share. Ordinarily, Delaware law would prohibit Delek from acquiring the rest of Alon for a period of three years once Delek acquired an ownership stake that large. But instead, Alon’s board of directors approved the sale and shortened the statutory period from three years to one year. During that one year period, Delek was contractually required to not seek to acquire the remaining shares of Alon stock. However, after the merger of Alon into Delek was announced on January 3, 2017, the proxy revealed that almost immediately upon Delek’s block purchase of Alon stock, discussions ensued regarding a potential combination of the two companies.

In fact, the proxy demonstrated that Alon’s board of directors immediately formed a special committee to evaluate an eventual combination of Alon and Delek. For months, the chairman of that special committee chased Delek for a deal, repeatedly bidding against itself. Ultimately, a merger was agreed to at an exchange ratio of 0.504 shares of Delek stock for each share of Alon stock, reflecting a value of $12.13 per Alon share, a significant discount to what Delek had paid for its initial stake.

Believing the terms of the merger were the result of an unfair process and undervalued Alon’s common stock, Kessler Topaz initiated litigation alongside Delaware co-counsel in 2017. Defendants moved to dismiss the action in July 2018.

The Court of Chancery denied defendants’ motions to dismiss on June 28, 2019. Nearly all of the claims asserted by Kessler Topaz survived. Also, because substantive merger negotiations began in the one-year period where Delek was contractually required to not seek to acquire the remaining shares of Alon stock, the Court of Chancery sustained plaintiffs’ statutory claims that the merger was invalid under Delaware law. This case is now set to move forward into discovery where Kessler Topaz will seek to prove that the merger was unfair for all of Alon’s former minority shareholders.

Associate
D 484.270.1405
Associate
D 484.654.2899
Partner
D 610.822.2202
Partner
D 610.822.0248