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Negotiating Against Yourself: Flawed Negotiating Process Leads Chancery Court to Deny M&F-Premised Motion to Dismiss

Posted by on Tuesday, September 22, 2020 in Delaware Corporate Law Bulletins, En Banc.

“In Alon USA, a target company minority stockholder challenged a transaction where a stockholder owning ‘48% [of the] equity interest’ in the target purchased the remainder of the outstanding stock via a merger transaction. In sorting out this dispute, Vice Chancellor Kathaleen S. McCormick probed several thorny issues, including (i) whether plaintiff had standing as a third-party beneficiary to enforce a stockholder agreement to which it was not a party; (ii) if so, whether the negotiations leading up to the merger violated the stockholder agreement; (iii) related questions under seldom-litigated Section 203 of the Delaware General Corporation Law (‘DGCL § 203′); (iv) whether the acquirer exercised ‘de facto control’ of target so as to invoke the entire fairness standard of review; and (v) if so, whether the parties satisfied the M&F Framework and, in particular, the ab initio requirement to regain benefit of business judgment review.”

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Robert S. Reder and Matthew K. Vallade