(Bloomberg) -- Fresenius SE doesn’t have to consummate a canceled merger with U.S. rival Akorn Inc. after the Delaware Supreme Court found the generic drugmaker’s business suffered a rapid downturn prior to the deal’s closing, triggering Fresenius’s right to walk away.

Shares of Akorn plunged, dropping 28 percent to their lowest intraday price in more than eight years.

The case’s “record adequately supports the Court of Chancery’s determination that Akorn suffered a material adverse effect” that excused Fresenius from closing the deal, the state’s highest court said Friday.

Akorn sued in April after Fresenius pulled out of the deal, with Fresenius citing the U.S. company’s plunging revenues and operational problems. As the deal was being finalized, Fresenius officials discovered Akorn wouldn’t meet profit projections. An anonymous whistle-blower also tipped off Fresenius executives about a longstanding pattern of problems in Akorn’s drug-development and manufacturing systems.

Akorn officials claimed Fresenius focused on minor regulatory and manufacturing miscues as a pretext for canceling the buyout after suffering “buyer’s remorse.” Fresenius had suffered some of the same kinds of operational problems, they said.

After a weeklong trial, Judge Travis Laster ruled in October that the deterioration of Akorn’s business was severe enough to create a “material adverse event” allowing Fresenius to walk away. That caused Akorn’s stock to fall almost 60 percent in New York.

The case marked the first time the Delaware Supreme Court has weighed the thorny question of when a company can cancel a purchase because the target’s business took a sharp downturn before a deal closed.

The case is Akorn Inc. v. Fresenius Kabi AG, No. 535-2018, Delaware Supreme Court (Dover).

To contact the reporters on this story: Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net;Joshua Fineman in New York at jfineman@bloomberg.net

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Peter Jeffrey

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