Document Type

Article

Publication Date

January 2008

Abstract

Introduction: "Much attention has been devoted to the seeming inconsistency in the Delaware Supreme Court's holdings that predicate the choice of monitor governing a going-private transaction based on the form of the transaction. Weinberger v. UOP, Inc.' is the beacon of going private law, requiring controlling shareholders in a conflict-of-interest long-form merger to prove the entire fairness of that transaction. Kahn v. Lynch Communication Systems, Inc. reinforced Weinbergds holding by requiring the entire fairness monitor in long-form mergers even where the controlling shareholders have provided a method to immunize their controlling influence. Against this stalwart adherence to the entire fairness monitor in conflict-of interest long-form mergers came two unrelated decisions from the Delaware Supreme Court: Solomon v. Pathe Communications Corp. and Glassman v. Unocal Exploration Corp. Solomon held that the controlling shareholder was not required to pay a fair price in a non-coercive tender offer made with full disclosure and Glassman held that the controlling shareholder was notrequired to prove entire fairness in a short-form merger. It took little time to appreciate that going private through a tender offer followed by a short-form merger (hereinafter" tender offer/SFM"), rather than through a long-form merger, would allow controlling shareholders to avoid the demanding entire fairness monitor.' Controlling shareholders further benefit from this two-step transaction because it offers appraisal rights only to those shareholders-typically small in number-who both do not tender and who otherwise perfect their appraisal rights in the short-form merger; in contrast, a long-form merger offers the equivalent of class action appraisal rights under the auspices of the entire fairness monitor.

Share

COinS