Hostile takeovers: when the 'sale' or 'break-up' of the company is inevitable, the fiduciary obligation of the directors are to maximize immediate stockholder value by securing the
Supreme Court 1986: confirmed a preliminary injunctino by the DCC precluding Revlon from consummating a transaction with one bidder when an active and ongoing auction was ongoing
Corporate defensive tactics against take-over bids
Supreme Court 1985: BOD may only try to prevent a take-over where it can be shown that there was a threat to corporate policy and the defensive measures adopted were 1) proportional and 2) reasonable given the nature of the threat.
Modifies defensive tacts test in Unocal: involves BOD's ability to use defensive measures such as poison pills or buybacks to prevent a hostile takeover
Supreme Court 1995: BOD must first determine if the defensive measure is draconian in that it has the effect of 'precluding' or 'coercing' shareholders choice.
When a lock up is reasonable and when a company can bypass Revlon duties when selling itself: Time Warner merger litigation
Supreme Court 1989: Revlon was a company that laready was determined to sell itself to highest bidder. Time was not simply selling off assets, journalistic integrity was important. So no Revlon test, and there was a reasonable basis to maintain a corporate plan under Unocal.
Business Judgment rule
Supreme Court 1984: must show failed to act in 1) good faith; 2) honest belief that act was in best interest of the company and 3) on an informed basis.
Majority shareholders violated fiduciary duties by preclusively and coercively locking up the deal. Arguably most controversial M & A case in a decade. Deal contained 'lock-up' and
Supreme Court 2003
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