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Kahn v. M & F Worldwide Corp.
Delaware Supreme Court
88 A.3d 635 (Del. 2014)
MacAndrews & Forbes Holdings, Inc. (M & F) (defendant) was a 43 percent stockholder in M & F Worldwide Corp. (MFW). M & F proposed to buy the remaining common stock of MFW to take the corporation private. The transaction was subject to two stockholder-protective procedural conditions: (1) the approval of a special committee to be appointed by the MFW board of directors, and (2) the approval of a majority vote of MFW minority stockholders. The MFW board established the special committee, which approved the transaction. The minority stockholders voted to approve the merger. Kahn, et al. (plaintiffs) brought suit, arguing that even both protections combined are inadequate to protect minority stockholders, because directors on the special committee may be inept or timid and MFW minority stockholders may be subject to improper influence. The plaintiffs claimed that the entire fairness standard should apply to the merger. In addition, the plaintiffs alleged that the special committee was not independent because of various relationships between members of the special committee and M & F. The Delaware Court of Chancery ruled in favor of M & F. The plaintiffs appealed.
Rule of Law
Holding and Reasoning
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