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The Disclosure of Projections Under Delaware Law

April 1, 2009, Michael B. Tumas, Michael K. Reilly, Pamela L. Millard

Over the past year, the Delaware Court of Chancery issued three decisions and one bench ruling that have fueled the debate concerning whether certain “soft information,”particularly financial projections, must be disclosed as a matter of Delaware law when a corporation is seeking stockholder approval of a merger transaction. Those decisions indicate that a context-specific analysis, and not a rote legal standard, is necessary to determine whether projections are material, and thus must be disclosed, in a specific case under Delaware law. In employing such an analysis, the Court consistently applied the “fair summary” standard articulated in In re Pure Resources, Inc., and considered similar factors when determining whether the projections were material, including (i) the reliability of the projections, (ii) the transaction structure, (iii) the utility of the projections, (iv) the target’s particular circumstances, (v)whether the projections were relied upon by the financial advisor and the target board, and shared with the bidder, and (vi) the presence of any partial or incomplete disclosure.

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