Fresh Market Board Dodges Suit Over $1.4B Apollo Acquisition

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By Yin Wilczek

A shareholder lawsuit alleging Fresh Market Inc. directors breached legal duties in the company’s $1.4 billion acquisition by Apollo Global Management LLC was dismissed by a Delaware state court.

The Delaware Chancery Court’s Sept. 28 ruling adds to recent cases in which the state’s courts have allowed board members to escape merger-related litigation under Corwin v. KKR Financial Holdings LLC. The 2015 decision holds that Delaware courts must limit their reviews over certain deals that are approved by a majority of fully informed and disinterested shareholders.

“This matter, to my mind, presents an exemplary case of the utility of that ratification doctrine, as set forth by Corwin and Volcano,” wrote Vice Chancellor Sam Glasscock III ( Morrison v. Berry , 2017 BL 344312, Del. Ch., No. 12808-VCG, 9/28/17 ).

The chancery court earlier this year dismissed a separate shareholder lawsuit challenging another Apollo acquisition—Diamond Resorts International Inc. That case also was dismissed under Corwin.

Private Buyout

Apollo Global Management, the buyout arm of private equity firm Apollo Management LP, announced its acquisition of Fresh Market, a grocery chain based in Greensboro, N.C., in March 2016.

In a complaint filed in October 2016, Fresh Market shareholder Elizabeth Morrison said the sale process was flawed because Ray Berry, the company’s founder and board chairman, helped Apollo buy the company on the cheap. She also alleged that the other board members concealed important facts from shareholders for “disloyal reasons.”

The court found that while Berry favored a buyout by Apollo, he recused himself when the board considered the company’s sale. It also said that the other directors created a special committee of three independent members to consider strategic alternatives. Apollo ultimately was the successful bidder when the company was auctioned.

The court rejected Morrison’s argument that the stockholders tendering their shares weren’t informed of important facts, including Berry’s prior interaction with Apollo and his threat to sell his shares on the market if the merger didn’t close. A review of the company’s financial filings showed that “Berry’s activities and his connection to Apollo were adequately disclosed,” Glasscock said.

To contact the reporter on this story: Yin Wilczek in Washington at ywilczek@bna.com

To contact the editor responsible for this story: Seth Stern at sstern@bna.com

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