It was one of the biggest court showdowns in Corporate America for 2007 -- that is, the fight between Cerberus Capital Management and United Rentals (NYSE: URI).
The issue: would Cerberus be forced to buyout the company?
Well, Wall Street said it all: the stock price of United Rentals plunged 17% to $17.91. Yes, it's another harsh lesson in the post-boom private equity world.
If you read the legal decision, the Delaware Court justice, William B. Chandler III, spun some clever mythical allusions in his opinion. Yet, despite this fun, it was a pretty serious look at the meltdown of a $4 billion transaction.
Interestingly enough, this is a classic contracts case. Both parties are sophisticated players -- with expensive attorneys -- and understand the ramifications of their decisions.
So, Chandler's key contention is that United Rentals should have realized that there was no intent for Cerberus to be required to do a deal. If anything, the contract language was fairly fuzzy -- as were the negotiations.
As a result, Cerberus will need to pay a $100 million breakup fee -- which is pretty much small-time stuff.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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