Del. Supreme Court affirms ruling on Williams Cos poison pill

(Reuters) - Delaware’s top state court has upheld a ruling that The Williams Cos Inc’s board didn’t act in the oil pipeline company’s best interest when it adopted an “extreme” poison pill.

The Delaware Supreme Court said in an en banc ruling on Wednesday that it was agreed with a February ruling barring the board from continuing its “unprecedented” poison pill plan.

In a Thursday statement, Gregory Varallo of Bernstein Litowitz Berger & Grossmann, who is co-advising the Williams shareholders who sued over the plan, said the case reaffirms that boards can’t use poison pills "to chill the shareholder franchise.”

The Davis Polk & Wardwell attorneys representing Williams did not respond to a request for comment on Thursday. Neither did representatives for the company. The Friedman Oster & Tejtel attorneys co-advising the shareholders declined to comment.

The company adopted the poison pill in March 2020 to stave off shareholder activism as the company's share price cratered amid the onset of the COVID-19 pandemic and a global oil bidding war, according to the February opinion.

Once triggered, the Williams poison pill would allow all shareholders, except for the potential acquirer, to purchase additional shares at a discounted price.

A Williams shareholder sued the company and board in September 2020, alleging that the plan’s “insidious” features “denuded the corporate franchise” and shut down investors’ ability to influence the company.

In February, McCormick said the poison pill included “a more extreme combination of features" than any other pill previously reviewed by the court, including a 5% trigger.

Varallo said on Thursday that the case was the first time that the Delaware courts reviewed a pill with a 5% trigger that wasn't used to protect a company's net operating losses from tax code limitations

On appeal, Williams said that the lower court failed to show that the plan had chilled stockholder activity. The company also said the court did not “adequately consider the once-in-a-lifetime storm facing Williams at the time of the Plan’s adoption.”

The case is The Williams Companies, Inc v. Wolosky, Delaware Supreme Court, No. 139-2021.

For The Williams Cos: Andrew Ditchfield, Brian Burnovski and Mari Byrne of Davis Polk & Wardwell

For the shareholders: Mark Lebovitch and Gregory Varallo of Bernstein Litowitz Berger & Grossmann; Jeremy Friedman and David Tejtel of Friedman Oster & Tejtel

(UPDATE: This story has been updated with comments from a Bernstein Litowitz Berger & Grossmann attorney advising the shareholders.)

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