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In re Synthes, Inc. Shareholder Litigation

Delaware Court of Chancery
50 A.3d 1022 (2012)


Hansjoerg Wyss was the controlling stockholder in Synthes, Inc. (Synthes). Wyss was the company’s CEO for 30 years before he retired. Wyss sought to divest his Synthes shares, but given his high number of shares, doing so on the public market would harm the company’s stock price. Wyss thus needed a transaction to liquidate his stock. Wyss was the only stockholder who owned enough stock that selling would affect the company’s stock price. Synthes received a merger offer contingent on Wyss, as controlling stockholder, remaining a Synthes investor. The offer would have cashed out all Synthes minority stockholders. Wyss and the other Synthes board members declined this offer and ultimately accepted an offer from Johnson & Johnson (J&J). Wyss and the board negotiated extensively with J&J, ultimately receiving a higher price than initially offered. Under the J&J offer, all Synthes stockholders received 65 percent J&J stock and 35 percent cash. Wyss declined to take the premium to which he was entitled based on his position as controlling stockholder. Rather, he received the same pro rata payout as the minority stockholders. Minority Synthes stockholders (plaintiffs), sued Wyss and the other members of Synthes’s board of directors (defendants), claiming a breach of fiduciary duty. The plaintiffs argued that Wyss’s desire to liquidate his stock rendered the merger with J&J a conflicted transaction subject to the entire fairness standard because Wyss would only consider bids that would cash him out. The defendants filed a motion to dismiss.

Rule of Law


Holding and Reasoning (Strine, J.)

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