Document: Kahn v. M&F Worldwide Corp., No. 334, 2013 (Del. Mar. 14, 2014)
The dispute in this case arose out of a 2011 acquisition of M&F Worldwide Corp. (“MFW”) by its controlling stockholder, MacAndrews & Forbes Holdings, Inc. (“MacAndrews”). MacAndrews offered to take MFW private contingent upon two stockholder-protective procedural conditions: (1) negotiation and approval by a special committee of independent MFW directors and (2) approval of the acquisition by a majority of the minority stockholders who were unaffiliated with MacAndrews.
In upholding the validity of the merger, the Delaware Supreme Court opted to use the deferential business judgment standard of review as opposed to the entire fairness standard of review that generally applies to controller transactions. The Court articulated a specific set of guidelines that, if satisfied, would warrant application of the business judgment standard to a controller transaction. Specifically, the Court held that the deferential business judgment standard will apply to controller transactions only where: (1) the controller conditions the procession of the transaction on the approval of both a special committee and a majority of the minority stockholders; (2) the special committee is independent; (3) the special committee is empowered to freely select its own advisors and to say no definitively; (4) the special committee meets its duty of care in negotiating a fair price; (5) the vote of the minority is informed; and (6) there is no coercion of the minority. The Court, however, was careful to caution that unless both procedural protections for the minority stockholders are established prior to trial, the entire fairness standard of review will apply.