Activist That Encouraged Merger Only To Change Its Mind Denied “Extraordinary Remedy” Of A Deal Injunction
The Delaware Court of Chancery’s recent decision in HoldCo Opportunities Fund V, L.P. v. Arthur G. Angulo, No. 2025-1360-MTZ (Del. Ch.), underscores Delaware courts’ rightful hesitancy to entertain M&A injunctions when stockholders are able to choose for themselves, particularly where no topping bidder exists.
The story begins with a sale process that an activist investor, HoldCo, encouraged Comerica to pursue and which generated multiple proposals from Fifth Third and a second unnamed financial institution. In October 2025, Comerica and Fifth Third announced that they had entered into a merger agreement. Once Comerica and Fifth Third’s stockholders approved the merger (with over 95% of the voting shares representing 73% of Comerica’s outstanding stock) and after it received regulatory approval, all material conditions for the merger were expected to be satisfied by the end of January 2026. The merger agreement required that the deal close on the first business day thereafter – February 1, 2026. After initially touting the merger as a “rare win for Bank Activists,” HoldCo reversed course and, on November 21, sued to enjoin the merger – an “extraordinary remedy” requiring a showing of a colorable claim, threat of irreparable harm, and equities weighing in the movant’s favor. HoldCo alleged that the merger agreement’s deal protections were illegal under 8 Del. C. § 141(a) and Omnicare because they locked Comerica into the transaction for one year without the right to terminate for a better deal. HoldCo failed to clear the high hurdle for obtaining an injunction.
The Deal Protections Were Not Illegal Nor Inequitable
HoldCo argued that the deal protections impermissibly constrained Comerica. If Comerica pursued a better deal, Fifth Third – not Comerica – held the contractual right to terminate, and Comerica would be required to pay a termination fee. The Court of Chancery rejected this argument, emphasizing that the deal protection provisions were symmetrical. Relying on Energy Partners, Ltd. v. Stone Energy Corp., the court explained that a “fiduciary out” clause need not be paired with a unilateral termination right or be free of a break free to preserve the board’s ability to discharge its fiduciary duties. The court concluded that the other challenged provisions – including the termination fee – did not change that conclusion, including because the termination fee was not oppressive.
The court separately addressed HoldCo’s challenge to the one-year outside date. It explained that the outside date did not strip the board of its managerial authority. Rather, the outside date defined how long the board must work to close the merger once stockholders approved it. The court distinguished Omnicare, Quickturn, and Ace Ltd. on the basis that they addressed provisions that made it impossible for any other proposal to succeed or precluded consideration of other proposals.
The court next rejected HoldCo’s argument that the merger constituted an unreasonable defense measure under Unocal. It first expressed skepticism that the transaction was defensive at all, noting that (i) HoldCo had previously supported a transaction and indicated that it believed Fifth Third could offer the most value for Comerica, (ii) a majority of Comerica’s directors would lose their seats, and (iii) HoldCo would obtain stock in the post-closing entity. Even assuming the sale was defensive, HoldCo could not show that the deal protections were preclusive or coercive. The merger agreement’s fiduciary out clause left Comerica’s board to pursue other proposals, and the termination fee was not unreasonable, making the path for a higher bid attainable. Nor were the provisions coercive: the vote was not forced upon stockholders. And in the absence of oppressive deal protection measures or a coerced or uninformed vote, the merger price was not entrenching.
Irreparable Harm Not Shown For Want Of Topping Bidders
Although it could have ended its TRO analysis on its finding that HoldCo failed to raise a colorable claim, the Court of Chancery also considered the second necessary element for a TRO motion – irreparable harm – and similarly found no support. Specifically, HoldCo failed to raise a colorable claim that the challenged provisions drove other bidders away. Nor did the facts support such an argument, as HoldCo itself identified only three potential acquirors and predicted that Fifth Third could offer the highest premium. The court characterized HoldCo’s argument about would-be topping bidders as “rest[ing] on speculation.”
Risk To A Stockholder-Approved Transaction Weighed Heavily Against The Activist
Finally, the Court of Chancery concluded that the risk of an injunction outweighed any potential benefit. The court was particularly reticent to enjoin a transaction that afforded stockholders a premium in the absence of a competing offer, especially where no rival bidder emerged and where there was no reason to believe stockholders were not adequately informed or were coerced into accepting the merger. Ultimately, an injunction would “not make a higher offer or a different buyer appear.” To the contrary, as the court underscored, injunctions create risks of their own, threatening deals that stockholders have a chance to approve or reject for themselves. As the court rightly concluded: “the real risk of irreparable harm is not from the consummation of the merger – it is from this motion itself.”
The opinion is an excellent example of the Court of Chancery reacting quickly to issue decisions at the speed of business and of the care with which it decides matters challenging live M&A deals.
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