Americas Mining Corp. v. Theriault

Grupo México, S.A.B. de C.V., owned a 99.15 percent stake in Minera México, S.A. de C.V. (Minera). Grupo México was also the controlling shareholder of Southern Peru Copper Corporation (Southern Peru). In 2004 Grupo México proposed to sell its interest in Minera—which it valued at $3.05 billion—to Southern Peru for 72.3 million shares of Southern Peru stock—worth $3.05 billion at the time of the proposal. Because of Grupo México’s interest in Southern Peru, Southern Peru appointed a special committee of disinterested directors to evaluate the proposal. Initially, the special committee calculated that Grupo México’s interest in Minera was worth $1.7 billion at most, making the proposed transaction between Grupo México and Southern Peru uneven. Despite this initial valuation, the special committee changed its valuation methods to conform with Grupo México’s calculations. The special committee determined that a fair exchange would be Grupo México’s interest in Minera for 67.2 million shares of Southern Peru stock. When Southern Peru’s board of directors (the board) (defendants) approved the merger, 67.2 million shares of Southern Peru stock were worth $3.75 billion. A Southern Peru shareholder (the plaintiff shareholder) filed a shareholder derivative suit in Delaware Chancery Court against the board, alleging that it breached its duty of loyalty by approving the merger when Grupo México’s interest in Minera was worth less than $3.75 billion. At trial, the chancery court decided that the special committee was influenced by Grupo México’s demands about the value of its interest in Minera and, therefore, the board had the burden of showing that the merger was not unfair. The chancery court determined that the merger was unfair to Southern Peru and its minority shareholders and awarded the shareholders over $2 billion in damages and $304 million in attorney’s fees—15 percent of the judgment. The board appealed.