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(Yanik Chauvin/iSTOCKPHOTO)
(Yanik Chauvin/iSTOCKPHOTO)

Streetwise

Watch the fine print, hostile bidders Add to ...

It’s not every day that an Ontario Superior Court ruling gets cited prominently in a decision by perhaps the top commercial judge in the United States.

But Leo Strine, Chancellor of the Delaware Court of Chancery, included some Canadian content in his recent decision about a hostile takeover fight between U.S. gravel giants Martin Marietta Materials Inc. and Vulcan Materials Co.

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In a May 4 ruling that has made waves on both sides of the border, Judge Strine blocked Martin Marietta from going ahead with a hostile bid and proxy contest for Vulcan for four months.

He ruled that Martin Marietta used information about its target that it had received while the two were in friendly talks, violating a deal not to use the information for other purposes. (Martin Marietta was also handed another court defeat on Monday, when the Delaware court said it could not continue with its takeover while awaiting an appeal.)

It may seem odd, but the stopping of a $5.1-billion (U.S.) takeover came down partly to the simple meaning of the word “between.”

Here’s where the CanCon comes in. Judge Strine’s ruling cites a 2009 Ontario Superior Court decision in the case of Certicom v. Research in Motion Ltd.

In that ruling, Madam Justice Alexandra Hoy blocked a hostile takeover of Mississauga, Ont.-based Certicom Corp. by RIM, saying the BlackBerry maker had wrongly used confidential information obtained from Certicom to launch its bid. (Certicom later accepted a bid from RIM.)

Much of the judgment in the Martin Marietta case is occupied with a Bill Clintonian dissection of the meaning of the word “between” in the companies’ confidentiality agreement, which limited the use of the information to a “business combination transaction between” the two companies.

Judge Strine points to the “respected Court’s” ruling in the Certicom case and its assessment of that word – as an activity that must involve “reciprocal action,” for example, not a hostile takeover.

“A similar definition of ‘between’ was cited by the Ontario Superior Court of Justice in its well-known 2009 Certicom decision to support that Court’s conclusion that the parties’ use of the word ‘between’ in certain confidentiality agreements operated to block the unsolicited takeover bid of one party for the other,” Judge Strine’s decision reads.

Jeremy Fraiberg, a Toronto lawyer with Osler Hoskin & Harcourt LLP, says the decision shows that time and care are needed in what are often quickly negotiated confidentiality agreements.

“Confidentiality agreements are important to get right in the beginning,” he said. “Because even big sophisticated parties, with some of the best lawyers and in-house counsel … can end up in a dust-up over something like this.”

Follow on Twitter: @jeffreybgray

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