The Delaware Chancery Court ruled this week that it can’t force Fresenius (ETR:FRE) to follow through with its $4.75 billion merger with Akorn (NSDQ:AKRX).
The deal was designed to help Fresenius move into new dosage forms and therapeutic areas, including ophthalmic drugs, ear drops, nasal sprays and respiratory drugs. But Fresenius walked away from the deal in April, citing an investigation that found material breaches of FDA data integrity requirements related to Akorn’s operations.
Akorn filed suit against Fresenius one day after it was announced that Fresenius would abandon the deal.
This week, the Delaware Chancery Court found that Fresenius had not materially breached its obligations under the merger agreement and therefore could end its deal with Akorn.
“Fresenius validly terminated the Merger Agreement because Akorn’s Regulatory Compliance Representations were untrue, the deviation from the representations could not be cured by the Outside Date, and the degree of deviation would reasonably be expected to result in a Regulatory MAE. This scenario caused the Bring-Down Condition to fail in an incurable manner and entitled Fresenius to terminate,” the court wrote. “Fresenius also validly terminated the Merger Agreement because Akorn had materially breached the Ordinary Course Covenant and the breach could not be cured by the Outside Date. This scenario caused the Covenant Compliance Condition to fail in an incurable manner and entitled Fresenius to terminate.”
The court asked both parties to identify any further matters that need to be resolved before concluding the trial. Akorn issued a statement in response to the court’s ruling, writing that the company is disappointed and still believes that Fresenius violated the merger agreement.
“We intend to appeal, in an effort to vigorously enforce our rights and continue to protect the interests of our company and our shareholders,” the company said.
An earlier version of this article misspelled Fresenius in the headline and described the Delaware Chancery Court as an appeals court. It has since been corrected.
