Relatively recent jurisprudence in Canada and the U.S. has had an impact on how confidentiality agreements and standstill agreements are negotiated and considered, with respect to future hostile bid situations.
On January 19, 2009, Justice Alexandra Hoy of the Ontario Superior Court held that RIM was in breach of confidentiality agreements between RIM and Certicom and therefore was permanently ordered against proceeding with its take-over bid for Certicom. Interestingly, the standstill agreement between RIM had Certicom had expired about six months prior to when RIM launched its take-over bid. However, the two companies had confidentiality agreements in effect at the time of the takeover. Justice Hoy’s decision has had an effect on the negotiation of confidentiality and standstill agreements.
On May 4, 2012, the Delaware Court of Chancery issued an injunction against a hostile take-over bid by Martin Marietta Materials, Inc. for Vulcan Materials Company after finding that Martin Marietta breached the terms of a confidentiality agreement between the two companies. This occurred despite the absence of a standstill provision.
These cases highlight the importance of carefully drafted confidentiality/non-disclosure agreements and indicate that a party to any such agreement may not be able to commence a hostile take-over bid simply due to the absence of a standstill provision.