Mergers cont. Flashcards
What is a triangular merger
merge target with subsidiary of acquirer
A triangular merger is beneficial because it ___
- insulates parent from unknown risk
- allows more due diligence before merge
What is a reverse merger
folding subsidiary into target company
Weinburger key facts
- 7/13 UOP BOD connected to Signal
- feasibility study done by UOP offiers through UOP used for Signal and not shared with UOP
Plaintiffs in Weinburger argue that they were __
pushed out at unfair price (21 vs 24) and want damages since already done
Weinburger was a ___ action
direct
Three Weinburger takeaways
- entire fairness = fair dealing + fair price
- change valuation to match methods used widely in finance
- can maybe get “enhanced appraisal”
An enhanced appraisal challenges ____ because ___
entire transaction, way in which transaction conducted unfair to SHs
Weinburger says that merger can’t be challenged on the grounds that it ___ because ___
lacks a business purpose, implies benefits outside financial returns
Three main reasons behind Weinburger decision
- Signal controller not at arm’s length
- 102(b)(7) doesn’t apply to loyalty
- SH vote not informed
Why was Signal a controller in Weinburger?
50.5% of stock + controls board of UOP
Why was Signal disloyal?
spied on subsidiary to get a better deal
Why was UOP SH vote uninformed?
material information concerning UOP officer report withheld
Lynch key facts
Negotiations but BOD took last offer before Alcatel said it would go hostile
The plaintiffs in Lynch argued that there was a breach of loyalty because ____ and ___
Alcatel a controller and BOD caved
Lynch holding
Coercion requires injunction and not even the best most independent committee can cure that
Under Lynch the court found that a controlled transaction requires ___
entire fairness to burden shift to plaintiffs
Lynch found that the independent committee was still __ so ___
affected by Alcatel, maybe fair dealing but not fair price
Why was Alcatel a controller in Lynch?
- 43% of shares
- veto power from change in charter requiring greater than majority
- control in practice from comments to management
Before MFW, controlled transaction by default ___
doesn’t get BJR
Controllers are becoming more common in the US due to ___
private equity
Explain the burden shifting in Lynch
- P’s pled facts rising to loyalty
- To shift back D must show entirely fair and say independent committee
- P’s say coercion so shift back to Ds
What are two ways that controllers could survive litigation prior to MFW?
- independent committee with own lawyers and financial advisors
- approve merger and then go to SHs
What was the problem with independent committees prior to MFW?
even if do expensive distancing still get litigation and no BJR
