United Rentals' Case Against Cerberus Goes to Trial
A trial has begun in Greenwich, Conn.-based United Rentals' case against RAM Holdings and RAM Acquisition Corp. in Delaware Court of Chancery, located in Georgetown, Del. The lawsuit, initiated on Nov. 19, seeks to compel the RAM entities, the acquisition vehicles formed by Cerberus Capital Management, to complete their purchase of United Rentals.
The trial commenced on Dec. 18, in front of Chancellor William Chandler III after a one-day postponement by mutual consent of the parties. The postponement was to allow the parties to continue settlement discussions that were recently initiated.
A Reuters news report yesterday said that Cerberus' CEO, Stephen Feinberg, testified that his firm's liability in withdrawing its offer is limited to $100 million and cannot be forced to complete the deal. The statement decreased hopes for a settlement between Cerberus and United Rentals.
United Rentals issued a statement last week regarding the decision by the court to proceed with a trial. "We look forward to making a compelling case at the upcoming trial,” the statement read. “While we believed the case could be decided through summary judgment, we respect Chancellor Chandler's decision to give a matter of this magnitude a full trial before issuing his ruling. The trial presents an important opportunity to establish that the merger agreement should be enforced as written."
In a letter issued on his decision, Chancellor Chandler wrote: "I have concluded that while the question is exceedingly close, summary judgment is not an effective vehicle for deciding the contract issues in dispute in this case."
United Rentals added that it fulfilled its obligations under the merger agreement with the RAM entities and stands ready to complete the merger transaction on the agreed-upon terms.