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In re PNB Holding Co. Shareholders Litigation

Court of Chancery of Delaware
2006 WL 2403999 (2006)


PNB Holding Company (PNB) (defendant) was a rural Illinois bank holding company. PNB engaged in a merger to be reclassified as a subchapter S corporation that had the effect of cashing out the majority of PNB’s stockholders. The directors and their family members remained stockholders of the new S corporation. The directors and their family members represented 68 of more than 300 original PNB stockholders. The other stockholders were offered $41 per share. Although a majority of the votes actually cast by PNB’s minority shareholders were for the merger, there were cashed-out minority shareholders who did not vote. Counting the non-voting minority shareholders, approximately 49 percent of the total cashed-out shareholders and all the directors and family members voted in favor of the merger. Several shareholders (plaintiffs) dissented from the merger and sued for more money for their shares. At trial, a key issue was what level of review should be applied to evaluate the fairness of the $41 share valuation.

Rule of Law


Holding and Reasoning (Strine, J.)

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