In re Siliconix Inc. Shareholders Litigation

In May 2001, Vishay Intertechnology, Inc. (defendant), a majority shareholder of Siliconix Incorporated (defendant) informed Siliconix of a plan to acquire more of Siliconix’s common stock. The plan involved a stock-for-stock exchange offer, under which Vishay would exchange 1.5 shares of Vishay stock for every one share of Siliconix stock. A special committee appointed by Siliconix to evaluate the offer informed Vishay that it would be unlikely to approve the offer because it was an unfair exchange. However, on the following day, Vishay announced the exchange offer without the special committee’s approval. Raymond L. Fitzgerald (plaintiff), a shareholder of Siliconix’s common stock, filed a lawsuit against Vishay and Vishay’s chief executive officer, Felix Zandman (defendant) to enjoin the stock-for-stock exchange offer on the ground that the offer was not fair. Fitzgerald also argued that Vishay had used coercive tactics to pressure the minority shareholders to participate in the offer because Vishay had (1) timed the offer to take advantage of the momentary low value of Siliconix’s common stock and to keep the value low, (2) failed to carry out its proposed plan to merge with Siliconix if it acquired 90 percent of Siliconix’s stock, and (3) submitted a registration statement in which it disclosed it was considering removing Siliconix shares from the NASDAQ in order to pressure the Siliconix shareholders to trade in their stock or face a decrease in value. Fitzgerald also alleged that Siliconix had breached its fiduciary duty owed to the minority shareholders by not preventing the offer.