Planned Acceleration of the Business Integration is a Breach of Fiduciary Duty

 

On July 27, 2018, Alps and Alpine released a “Notice regarding the Execution of the Basic Agreement on the Business Collaboration between Alps Electric Co., Ltd. and Alpine Electronics, Inc.” In this notice, the companies state the following:

“…the Companies intend to accelerate the schedule, from the aspect of sales, to jointly promote joint development, from the aspect of manufacturing, to promote mutual utilization of manufacturing technologies and production sites, from the aspect of quality assurance, to promote the mutual utilization of evaluation and analysis facilities and, from the aspect of procurement, to strengthen functions of integrated purchasing and development purchasing.” [Emphasis Added]

We appreciate that Alps is eager to merge the businesses as soon as possible, however, Alpine’s management and board have a fiduciary duty to Alpine. At the current merger valuation, the merger will undoubtedly fail as over 42% of Alpine’s shareholder will vote against the deal.

With the impending failure of the deal, Alpine’s management and board of directors are in breach of their fiduciary duties by continuing to waste resources by focusing on the collaboration with Alps as these relationships will have to be unwound following the failure of the merger.

Instead, Alpine should be looking to develop strategic partners outside of Alps which would prove to be far more beneficial for the medium and long-term growth of corporate value.