In a case of first impression, the Delaware Chancery Court ruled that the Revlon standard would likely apply to half-cash, half-stock mergers. Under the Revlon standard, certain change of control transactions are subjected to a heightened level of judicial review requiring the board of directors of the target company to obtain the best value reasonably available to the target company shareholders. The court stated that application of the Revlon standard was appropriate since a significant portion of the target company shareholder's investment would "be converted to cash and thereby deprived of its long-run potential." In so ruling, the court cautioned that the Delaware Supreme Court had not provided guidance as to the applicability of the Revlon standard to transactions (such as half-cash, half-stock mergers) involving the cash-out of a significant portion, but not all, of the target company's equity.
In re Smurfit-Stone Container Corp. S'holder Litig., C.A. No. 6164 (Del.Ch. May 20, 2011)