Cleary Gottlieb successfully represented Kindred Healthcare Inc. and its board of directors in defeating a motion for a preliminary injunction filed by Brigade Capital in the Delaware Court of Chancery.
Brigade, which has acquired more than 7 percent of Kindred’s shares, filed this action to challenge the proposed acquisition of Kindred by a consortium of affiliates of TPG Capital, Welsh, Carson, Anderson & Stowe, and Humana Inc. on March 8, 2018, just three weeks before Kindred stockholders were scheduled to vote on the proposed merger.
At the same time, Brigade filed a motion for expedited proceedings on its numerous claims challenging the sale process and proxy disclosures. After briefing and a telephonic hearing on March 15, 2018, Vice Chancellor Glasscock denied expedition on all of Brigade’s process claims and all but one of its disclosure claims. The court permitted expedited discovery on Brigade’s allegation that one of Kindred’s directors, Sharad Mansukani, M.D., who also serves as a Senior Advisor to TPG, shared confidential information about the process with TPG to advantage the consortium in negotiations.
After the completion of expedited discovery, Brigade determined to continue to push forward with its claim and the court scheduled a hearing on Brigade’s motion to preliminarily enjoin the stockholder vote. Although disagreeing that the purportedly omitted facts were material, Kindred prepared supplemental disclosures to address the issues raised by Brigade, which Kindred filed with the SEC before markets opened the following day.
Notwithstanding the supplemental disclosures, Brigade continued to press its preliminary injunction motion by arguing that the supplemental disclosures continued to be false and misleading and, in addition, the supplemental disclosures were not filed sufficiently in advance of the vote scheduled for March 29, 2018 to be fully considered by Kindred stockholders. After expedited briefing, the parties appeared for a hearing on Brigade’s motion in Delaware on March 27, 2018. At the conclusion of the hearing, Vice Chancellor Glasscock rejected all of Brigade’s claims that the disclosures were false or misleading, including because there was no evidence Dr. Mansukani shared information with TPG about the sale process.
The court also rejected Brigade’s argument that Kindred’s stockholders needed more time to consider the supplemental disclosures in deciding how to vote. Out of concern that the process to demand appraisal is time-consuming, however, the court directed Kindred to hold the vote open for five business days for the limited purpose of allowing any stockholder who wishes to demand appraisal, which must be done before the vote closes, to do so.