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Equity Group Holdings v. DMG, Inc.
United States District Court for the Southern District of Florida
576 F. Supp. 1197 (1983)
DMG (defendant), a Florida corporation listed on the New York Stock Exchange (NYSE), was a wholly owned subsidiary of Diversified Mortgage Investors, Inc. (DMI) (defendant). DMI had a large tax-loss carryforward and an outstanding bank loan. DMG agreed to issue authorized DMG voting preferred shares to Carlsberg Corporation (Carlsberg) (defendant) in exchange for convertible preferred shares held by Carlberg’s subsidiary Carlsberg Resources Corporation (defendant). The same day, DMG, DMI, and Carlsberg agreed that Carlsberg would merge into DMI, and Carlsberg’s outstanding shares would be converted into DMG common through new common shares issued to Carlsberg shareholders. After the stock exchange and merger, Carlsberg shareholders would own 64 percent of DMG common stock. Equity Group Holdings (Equity) (plaintiff) owned DMG common stock. DMG had rejected a proposed merger with Equity’s affiliate. Equity sought to enjoin a DMG shareholder vote requiring a quorum to approve the issuance of voting shares to Carlsberg. Equity argued that the share issuance and merger of DMI and Carlsberg would constitute a de facto merger of DMG into Carlsberg that required approval by a majority of all outstanding shares under Florida Corporation Act Section 607.221.
Rule of Law
Holding and Reasoning (Aronovitz, J.)
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