The Delaware Supreme Court’s recent decision in Chicago Bridge & Iron v. Westinghouse Electric, resolved a $2 billion post-closing dispute about the interplay between common features of acquisition agreements: sellers’ representations of the accuracy of the target’s financial statements, and so-called “true up” provisions for purchase price adjustments for working capital changes between signing and closing. The Supreme Court harmonized the provisions by addressing, among other things, the limited purpose of true up provisions. It accordingly rejected the acquirer’s attempt to raise longstanding accounting issues to obtain a large price adjustment through the true up process, when the purchase agreement barred the acquirer from any post-closing relief for breach of a similar warranty.
Background
Appellant/plaintiff-below Chicago Bridge & Iron is a construction contractor that built nuclear power plants through its subsidiary, CB&I Stone Webster (Stone). Appellee/defendant-below Westinghouse Electric Co. (Westinghouse) designs nuclear power plants. In 2008, Stone and Westinghouse were hired to build two plants. After years of delays and cost overruns resulting in disputes between the parties, in 2015 they agreed that Chicago Bridge would sell Stone to Westinghouse and exit the project.
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