The Delaware Chancery Court dismissed a lawsuit filed by the former shareholders of a company that was acquired by a competitor. The claimants alleged that the acquisition was an unfair deal in that it benefitted a private equity sponsor at the expense of the other stockholders. The claimants argued that the acquisition was subject to review by the court under the heightened "entire fairness" standard. The court declined to invoke the "entire fairness" standard on two grounds. First, the private equity sponsor was not found to be a controlling person of the acquired company. In this regard, the private equity sponsor held a 27.7% interest in the acquired company and the right to appoint only 2 of the 10 members of the acquired company's board of directors. Second, the private equity sponsor was not found to have any conflict of interest with the other shareholders of the acquired company. In particular, in connection with the acquisition (which was structured as a merger), the private equity sponsor and the other shareholders received identical per share consideration. The court also took notice of the fact that the acquisition was the culmination of a nine-month process involving a full market check and solicitation of over 100 potential bidders.
In re Morton's Rest. Group., Inc. S'holders Litig., No. 7112-CS (Del.Ch.Ct. July 23, 2013)