A conflict of interest must be alleged before a transaction can be reviewed under the more stringent entire-fairness standard, the Delaware Court of Chancery has ruled. The court’s opinion dismissed a lawsuit filed by shareholders of Crimson Exploration Inc. who objected to the company’s $390 million all-stock merger with Contango Oil & Gas Co.
Crimson, a Houston oil and gas company, completed its merger with Contango, a rival oil company also based in Houston, earlier this year. Shortly after the transaction was announced last year, Crimson’s shareholders filed a Delaware Chancery Court lawsuit alleging the company’s controlling stockholder, Oaktree Capital Management LP, forced the sale at an inadequate price and received benefits unavailable to common stockholders. At the time of the transaction, Oaktree owned roughly 33.7 percent of Crimson’s stock and an unspecified portion of the company’s debt, according to court documents.
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