Transperfect Global Inc.

The Delaware Court of Chancery recently approved a plan to sell TransPerfect Global, Inc. (“TransPerfect” or the “Company”) to co-owner Philip Shawe. In the Court’s most recent opinion issued earlier on February 15, 2018, In re TransPerfect Global, Inc., C.A. No. 9700-CB (Del. Ch. Feb. 15, 2018), Chancellor Bouchard  approved a sale agreement that permitted Shawe to acquire shares of the company owned by Elting.  Specifically, the Court accepted the recommendation of the court-appointed Custodian to approve a transaction in which one of the co-founders of TransPerfect Global, Inc. (Philip Shawe) will acquire the shares held by the other co-founder (Elizabeth Elting) to resolve the pending litigation.

From March through November 2017, the Custodian conducted an extensive sales process to follow the Court’s mandate “to sell the Company with a view toward maintaining the business as a going concern and maximizing value for the stockholders.”  After three formal rounds of bidding and an informal fourth round to elicit “final” bids, two leading bidders emerged: Shawe and H.I.G. Middle Market, LLC (“H.I.G.”), the owner of TransPerfect’s leading competitor. The Custodian believed that Shawe would offer greater consideration
than H.I.G. with fewer closing conditions, while retaining virtually all of the Company’s employees, and thus negotiated with Shawe to finalize a transaction.

Co-owner Elizabeth Elting objected to the Custodian’s recommendation that the court approve the Sale Agreement, asking the Court to reject the Sale Agreement and to direct the Custodian to negotiate a transaction with H.I.G.  The Court rejected each of Elting’s objections, while providing guidance on the discretion of a Court-appointed custodian in selling a deadlocked corporation.

By way of background, in November 2017, Chancellor Bouchard approved a modified auction of the Company, over the objections of Shawe.  For a link to a prior post discussing the November 2017 opinion, click here.   Prior to that, in September 2017, the Court denied an application for interlocutory appeal filed by Philip Shawe’s mother, who is a 1% stockholder of the Company.  The appeal request was filed in response to the Court’s denial of Ms. Shawe’s request to hold an election under Section 211 of the DGCL.  Click here for a post discussing the September 2017 opinion.

UPDATE: On May 3, 2018, the Delaware Supreme Court affirmed the February 15, 2018 opinion of Chancellor Bouchard approving the sale of TransPerfect, summarized above.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  Carl is admitted in the State of Delaware and regularly practices before the Delaware Court of Chancery, with an emphasis on shareholder disputes. You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

In the latest development in the ongoing TransPerfect dispute, the Court of Chancery denied Ms. Shawe’s application for interlocutory appeal, in the opinion of Shawe v. TransPerfect Global, Inc., C.A. No. 2017-0306-AGB (Del. Ch. Sept. 7, 2017).

By way of background, on August 13, 2015, the Court granted Elizabeth Elting’s petition to appoint a custodian (“the Custodian”) to sell TransPerfect Global, Inc. (“TPG” or the “Company”) under 8 Del. C. § 226 in order to remedy the dysfunction in the co-founders’ management of the Company and the deadlocks at the board and stockholder level.

In June 2016, Court accepted, with certain modifications, the Custodian’s recommendation for a proposed plan of sale for the Company, and issued an implementing order in July 2016 (the “Sale Order”). On February 13, 2017, the Supreme Court affirmed the post-trial decision and the Sale Order.

Ms. Shawe filed the latest action on April 20, 2017, asserting a claim under Section 211(c) of the DGCL to compel TPG to hold an annual meeting of stockholders.  Elting then filed a motion to enforce the Sale Order and for sanctions, asserting that the Section 211 action violated the Sale Order. The Court ordered the parties to engage in mediation before former Chancellor Chandler.

After mediation reached an impasse, on August 4, 2017, the Court issued a letter decision granting Elting’s motion to enforce the Sale Order, denying Elting’s motion for sanctions, and denying Ms. Shawe’s motion to expedite.  The Court found that Shawe’s Section 211 action was to remove the Custodian and end the sale process, which was inconsistent with the Sale Order, and that ordering a stockholders’ meeting “would be a futile exercise”.

Ms. Shawe applied for an interlocutory appeal of the August 4th ruling, which was opposed by Elting and the Company.

Chancellor Bouchard denied the application for interlocutory appeal.  The application is governed by Supreme Court Rule 42(b)(i), which provides that an interlocutory appeal will not be certified “unless the order of the trial court decides a substantial issue of material importance that merits appellate review before a final judgment.”  Del. S. Ct. Rule 42(b)(i).

The Court found that the August 4th ruling did not decide a substantial issue of material importance, but rather was the logical consequence of enforcing the Sale Order.  The Court also found that scheduling a stockholders’ meeting may jeopardize the sale process, and that no considerations of justice would be served by granting interlocutory review.  Stay tuned for further updates in the TransPerfect dispute.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  Carl is admitted in the State of Delaware and regularly practices before the Delaware Court of Chancery, with an emphasis on shareholder disputes. You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

Copyright: bbourdages / 123RF Stock Photo
Copyright: bbourdages / 123RF Stock Photo

On June 20, 2016, the Court of Chancery released another opinion in the nationally controversial saga of TransPerfect Global, Inc. (the “Company”). In re: TransPerfect Global, Inc., C.A. No. 9700-CB (Del. Ch. Jun. 20, 2016); Etling v. Shawe, C.A. No. 10449-CB (Del. Ch. Jun. 20, 2016); see also In re Shawe & Elting, LLC, C.A. No. 9661-CB, 2015 WL 4874733 (Del. Ch. Aug. 13, 2015)  Here, having previously ordered the sale of the Company by a designated custodian (the Custodian”), Chancellor Bouchard approved a modified auction of the Company (the “Modified Auction”), as recommended in the Custodian’s sale report (the “Sale Report”).  The Custodian recommended, and the Court agreed, that of the options provided in the Sale Report, the sale of the Company would be accomplished most effectively through:

[a] modified auction where each stockholder could solicit third-party investors as partners in an acquisition of [the Company], and where the Custodian could work with outside bidders who are interested in partnering with an existing stockholder in connection with any acquisition.

Despite objections from Philip Shawe, a 49% stockholder of the Company, the Court held that the Modified Auction was the “alternative most likely to maximize shareholder value while continuing the business as a going concern….”

In addition to providing the terms of the Modified Auction, the Sale Report included the Custodian’s requests for additional authority and discretion to oversee the Modified Auction.  The Custodian’s requests included “complete control over the auction process…; retention of financial advisors and other consultants to assist…with execution of the auction process; implementation of management and key employee incentive retention plans…; expansion of each selling stockholder’s existing non-compete and non-solicit arrangements…; [and] execution and delivery of agreements and other documents of each selling stockholder and [the Company].”  The Court accepted all of the Custodian’s requests, except for the expansion of the selling stockholders’ non-compete and non-solicit arrangements (the “Non-Compete Provision”).

The Court sustained Philip Shawe’s objection to the Non-Compete Provision, holding that “it would be inappropriate to impose non-competition or non-solicitation restrictions on a selling stockholder as a condition of the sale of the Company absent evidence of wrongdoing….[T]he purpose of the sale process is to maximize the value of the Company as it is and not to derive a hypothetically higher value based on contractual protections the Company many not currently possess.”

The Court ultimately requested that the Custodian submit an order that will effectively begin the Modified Auction process.  The order is to include the Custodian’s requests for additional authority and discretion (but not the Non-Compete Provision), a reservation of the right to seek non-competition or non-solicitation agreements upon a showing of wrongdoing by the selling stockholders, a provision that the sale of the Company is conditioned on approval by the Court, and any other provision necessary to effect the Modified Auction.