Essendant Inc.has been denied a motion by a Delaware court to dismiss breach-of-contract claims filed by Genuine Parts Company, which had planned to merge its S.P. Richards business unit with Essendant in an agreement signed in April 2018 that would have combined the two companies in the office supply wholesale business.

Sycamore Partners, a private equity firm that also owns office supplies retailer Staples, then 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 has sided with GPC in its claim that Essendant failed to meet contractual obligations by paying GPC a merger termination fee. GPC asserted that the termination fee was not only inadequate compensation, but that Essendant was liable for breaching other contract terms, notably a “non-solicitation” provision.

Source: MDM