The Delaware Court of Chancery applied the business judgment rule, rather than the more onerous entire fairness review, to a going-private transaction with a controlling stockholder after finding that such transaction was conditioned upon approval by both a special committee of directors and a majority-of-the-minority vote. After applying the less onerous business judgment rule standard, the court granted summary judgment dismissing all claims against the controlling stockholder.
The claim arose out of a merger which resulted in the controlling stockholder acquiring the 57% of the company it did not already own. The court granted summary judgment after finding that the (i) special committee of directors was independent, properly empowered and acted with due care and (ii) stockholder vote was fully informed and uncoerced. In granting summary judgment, the court stated that it was cognizant of prior Delaware case law decisions spanning almost two decades in which the more onerous entire fairness review was applied to transactions involving controlling stockholders. The prior decisions involved the use of either a special committee of directors or a majority-of-the-minority vote. The use of one of the foregoing procedural devices while shifting the burden of proof away from the controlling stockholder under the prior decisions did not change the standard of review. The Delaware Court of Chancery elected not to follow the prior decisions given that the controlling stockholder transaction under review was conditioned upon the use of both a special committee of directors and a majority-of-the-minority vote.
In re MFW S'holders Litig., C.A. No. 6566-CS (Del. Ch. Ct. May 29, 2013).