Court denies Essendant motion over dispute with GPC
A Delaware court has denied a motion by Essendant to dismiss breach-of-contract claims filed by Genuine Parts Company, which had planned to merge its S.P. Richards business unit with Essendant last year.
Essendant and Genuine Parts Company (GPC) had signed an agreement in April 2018 that would have combined the two competitors in the office supply wholesale business. Shortly thereafter, Sycamore Partners, a private equity firm that also owns office supplies retailer Staples, submitted a competing bid. The Essendant board of directors rejected Sycamore’s initial offer, but subsequently agreed to a second offer from Sycamore. Essendant terminated the agreement with GPC, paid GPC a $12 million termination fee as required by the agreement, and closed the deal with Sycamore.
GPC maintained the termination fee was neither an exclusive remedy nor an adequate remedy to compensate for its losses following Essendant’s termination of the agreement.
In denying Essendant’s motion, the court sided with GPC in its contention that Essendant failed to meet its contractual obligations by simply paying GPC a $12 million merger termination fee, which Essendant contended met its contractual responsibility. GPC asserted that the termination fee was not only inadequate compensation, but that Essendant was liable for breaching other contract terms, most notably a “non-solicitation” provision.
GPC maintained the termination fee was neither an exclusive remedy nor an adequate remedy to compensate for its losses following Essendant’s termination of the Agreement.
"I see no basis to conclude that GPC’s acceptance of the Termination Fee precludes it from pursuing breach of contract claims as a matter of law. Essendant does not cite any provision of the Agreement that prevents GPC from both accepting the Termination Fee and pursuing its breach of contract claims," wrote Joseph R. Slights, vice chancellor of the Court of Chancery, Georgetown, Delaware. Click here to read a transcript from the court's website.
Sycamore Partners, a private equity firm that also owns office supplies retailer Staples, acquired Essendant last year in a deal valued at close to $1 billion.
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