Chancery Court Rules That Fresenius Can Terminate Akorn Deal

Paul, Weiss secured a major victory for German healthcare group Fresenius SE & Co. when the Delaware Court of Chancery ruled that Fresenius was justified in canceling its $4.8 billion agreement to acquire Illinois-based Akorn, Inc.

Vice Chancellor Travis Laster found that Fresenius validly responded to a sharp downturn in Akorn’s business and Akorn’s blatant breaches of FDA data integrity requirements in deciding to terminate the deal under the Material Adverse Event clause in the merger agreement. Noting the many prior cases in which the court has criticized buyers who filed litigation after industry-wide or cyclical downturns made the acquisition less attractive, Vice Chancellor Laster called the Fresenius case “markedly different.” Writing that Fresenius “responded to a dramatic, unexpected, and company-specific downturn in Akorn’s business that began in the quarter after signing,” he held that Akorn suffered a MAE as a result of its post-signing financial collapse. He further held that Fresenius also validly terminated the acquisition because Akorn breached its representations and warranties regarding regulatory compliance and failed to operate in the ordinary course after signing the agreement. In so holding, Vice Chancellor Laster relied on the “overwhelming evidence of widespread regulatory violations and pervasive compliance problems at Akorn,” including Akorn’s repeated deception of the FDA.

The 247-page decision followed 11 weeks of highly expedited pre-trial discovery and five days of trial in July, which included 1,892 exhibits, 54 deposition transcripts, and numerous fact and expert witnesses at trial.

The Paul, Weiss team included litigation partners Lewis Clayton, Susanna Buergel, Andrew Gordon, Moses Silverman and Stephen Lamb and counsel Daniel Mason, Jonathan Hurwitz and Daniel Levi.