Cliff C. Gardner of Skadden, Arps, Slate, Meagher and Flom. Courtesy photo

Introduction

In Corwin v. KKR Financial Holdings, the Delaware Supreme Court held that a fully informed, uncoerced vote of the disinterested stockholders invokes the outcome-determinative business judgment rule standard of review for post-closing claims for money damages that would otherwise be subject to Revlon scrutiny. Put another way, such a vote may effectively cleanse certain fiduciary duty violations arising from merger activities. Recently, in In re Edgio Stockholders Litigation, the Chancery Court was asked to apply the same cleansing effect to a claim for injunctive relief analyzed under Unocal, but Vice Chancellor Morgan Zurn found that Corwin was inapplicable.

Facts

Limelight Network, Inc. (the company) is a telecommunications firm that "provides network service for delivery of digital media content and software." By early 2021, the company had faced an extended period of financial decline and was being discussed as an activist target. However, in June 2021, the company was approached by the private equity firm Apollo Global Management, Inc. (Apollo) regarding a potential combination with one of Apollo's investments, Edgecast Inc. (Edgecast). Edgecast was a business unit of Yahoo, Inc., whose parent company College Parent, L.P. (College Parent) was 90% owned by Apollo affiliate funds.

After conducting due diligence, exchanging term sheets, and receiving a fairness opinion, the company and College Parent executed a purchase agreement in March 2022. In short, the company bought all of Edgecast's issued and outstanding common stock, along with certain related businesses and assets. In exchange, College Parent "would hold approximately 35% of the combined company's outstanding stock." At or around closing, the company would change its name to Edgio, Inc.