Proposed Deal Averts Santander Squeeze-Out Trial

Santander Consumer USA Holdings Inc. and stockholders have tentatively settled a Delaware Court of Chancery stockholder suit challenging a $2.5 billion minority squeeze-out merger, slated to go to a five-day trial starting on Monday.

Andrew E. Blumberg of Bernstein Litowitz Berger & Grossman LLP, counsel for the stockholders, told Vice Chancellor Lori W. Will in a letter docketed late Wednesday that the two sides had reached an agreement in principle to end the case, subject to documentation and court approval.

In an August 2022 class suit, the stockholders accused SCUSA's board of setting up a tender offer that had no minimum requirement for approval, and that was completed with less than 30% of stockholders tendering their shares in favor of the $41.50 per-share price.

Shareholders argued that the company’s stock was worth significantly more than the $41.50 paid in the deal, with estimates ranging from $45 to $49 standing alone and "into the $60s with an empirically supported valuation of synergies."

The two sides argued over a call for an adverse inference regarding the deletions in court on Aug. 29, with the stockholders seeking sanctions against the big auto lender’s board, controller and parent for routine deletion of messages before the squeeze-out.

Attorneys for the stockholders told Vice Chancellor Will that the company had relied exclusively on the Signal messaging app — and its optional, thorough auto-delete functions — for top-level communications about the deal.

Ryan A. McCloud of Wachtell Lipton Rosen & Katz, counsel for SCUSA's directors, Santander Holdings USA and its parent, Spain-based Banco Santander SA, said in court last month that the suit failed to show that the message deletions violated a duty to preserve.

"Plaintiff seeks an adverse inference not because any one defendant took steps to actively destroy materials, rather, that some folks followed a company policy" requiring the use of Signal, McCloud said. He noted that the controller completed the squeeze-out "at the top of the market, not at the bottom," and said litigation in squeeze-outs is not unusual.

The merger plan became known as Project Max, McCloud said, with Banco Santander Chair Ana Botín creating a policy requiring the use of Signal for some communications. "Ephemeral," impermanent messaging apps are more commonly used, according to company policy in Europe, McCloud said during the August arguments.

The shareholders are represented by Gregory V. Varallo, Glenn R. McGillivray, Daniel E. Meyer, Mark Lebovitch, Jeroen van Kwawegen and Edward Timlin of Bernstein Litowitz Berger & Grossmann LLP, Kimberly A. Evans and Jason M. Leviton of Block & Leviton LLP, and Lee D. Rudy and Eric L. Zagar of Kessler Topaz Meltzer & Check LLP.

Santander Consumer USA Holdings, Santander Consumer USA Holdings and Banco Santander are represented by Garrett B. Moritz, Thomas C. Mandracchia and Dylan T. Mockensturm of Ross Aronstam & Moritz LLP, and Ryan A. McLeod, Iliria Camaj and Emma S. Stein of Wachtell Lipton Rosen & Katz.

The case is In re: Santander Consumer USA Holdings Inc. Stockholders Litigation, case number 2022-0689, in the Court of Chancery of the State of Delaware.

—Editing by Jay Jackson Jr. and Adam LoBelia.