Mergers cont.

Question 1

What is a triangular merger

Answer 1

merge target with subsidiary of acquirer

Question 2

A triangular merger is beneficial because it ___

Answer 2

• insulates parent from unknown risk
• allows more due diligence before merge

Question 3

What is a reverse merger

Answer 3

folding subsidiary into target company

Question 4

Weinburger key facts

Answer 4

• 7/13 UOP BOD connected to Signal
• feasibility study done by UOP offiers through UOP used for Signal and not shared with UOP

Question 5

Plaintiffs in Weinburger argue that they were __

Answer 5

pushed out at unfair price (21 vs 24) and want damages since already done

Question 6

Weinburger was a ___ action

Answer 6

direct

Question 7

Three Weinburger takeaways

Answer 7

• entire fairness = fair dealing + fair price
• change valuation to match methods used widely in finance
• can maybe get “enhanced appraisal”

Question 8

An enhanced appraisal challenges ____ because ___

Answer 8

entire transaction, way in which transaction conducted unfair to SHs

Question 9

Weinburger says that merger can’t be challenged on the grounds that it ___ because ___

Answer 9

lacks a business purpose, implies benefits outside financial returns

Question 10

Three main reasons behind Weinburger decision

Answer 10

• Signal controller not at arm’s length
• 102(b)(7) doesn’t apply to loyalty
• SH vote not informed

Question 11

Why was Signal a controller in Weinburger?

Answer 11

50.5% of stock + controls board of UOP

Question 12

Why was Signal disloyal?

Answer 12

spied on subsidiary to get a better deal

Question 13

Why was UOP SH vote uninformed?

Answer 13

material information concerning UOP officer report withheld

Question 14

Lynch key facts

Answer 14

Negotiations but BOD took last offer before Alcatel said it would go hostile

Question 15

The plaintiffs in Lynch argued that there was a breach of loyalty because ____ and ___

Answer 15

Alcatel a controller and BOD caved

Question 16

Lynch holding

Answer 16

Coercion requires injunction and not even the best most independent committee can cure that

Question 17

Under Lynch the court found that a controlled transaction requires ___

Answer 17

entire fairness to burden shift to plaintiffs

Question 18

Lynch found that the independent committee was still __ so ___

Answer 18

affected by Alcatel, maybe fair dealing but not fair price

Question 19

Why was Alcatel a controller in Lynch?

Answer 19

• 43% of shares
• veto power from change in charter requiring greater than majority
• control in practice from comments to management

Question 20

Before MFW, controlled transaction by default ___

Answer 20

doesn’t get BJR

Question 21

Controllers are becoming more common in the US due to ___

Answer 21

private equity

Question 22

Explain the burden shifting in Lynch

Answer 22

• 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

Question 23

What are two ways that controllers could survive litigation prior to MFW?

Answer 23

• independent committee with own lawyers and financial advisors
• approve merger and then go to SHs

Question 24

What was the problem with independent committees prior to MFW?

Answer 24

even if do expensive distancing still get litigation and no BJR

Question 25

Glassman takeaway

Answer 25

Statute trumps fiduciary duties

Question 26

Glassman key facts

Answer 26

90% ownership but still form special committee for merger

Question 27

Glassman issue

Answer 27

Do short form mergers satisfy entire fairness?

Question 28

Glassman holding

Answer 28

No process needed under short form merger

Question 29

Glassman says DGCL 253 ___

Answer 29

eliminates need for EF

Question 30

Glassman says ___ appraisal only remedy in short form merger

Answer 30

absent fraud

Question 31

Glassman says can only get appraisal ___

Answer 31

individually, no attorney’s fees

Question 32

MFW takeaway

Answer 32

if cleanse controlled transaction get BJR

Question 33

MFW key facts

Answer 33

• MA requires independent committee + SH vote
• say if reject offer won’t be another but company keeps status quo

Question 34

The acquirer in MFW is __

Answer 34

repeat one interested in changing the rules

Question 35

MFW issue

Answer 35

standard of review between controlling SH and subsidiary if merger conditioned on cleansing measures

Question 36

MFW holding

Answer 36

Dual-protective merger fulfills EF by default

Question 37

What are the MFW conditions for BJR

Answer 37

• approval by independent special committee
• majority vote of fully informed SHs
• no coercion

Question 38

What does MFW require of committee

Answer 38

• free to select own advisors
• free to say no
• meets duty of care in negotiating fair price

Question 39

Plaintiffs can challenge MFW like transaction by ___

Answer 39

saying these conditions didn’t actually exist

Question 40

MFW is supported by DGCL 144 which says ___

Answer 40

K not void for conflict if protections in place

Question 41

If any one of MFW conditions not met then ___

Answer 41

EF

Question 42

Sarasota key takeaway

Answer 42

All MFW transactions are required to get BJR

Question 43

Sarasota holding

Answer 43

SH not informed so didn’t meet MFW

Question 44

In Sarasota, the ____ triggered MFW

Answer 44

equity rollover

Question 45

If ____ may raise to loyalty but otherwise controller can sell to another controller

Answer 45

sell company to known looter