Kahn v. M & F Worldwide Corp.

88 A.3d 635 (2014)

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Kahn v. M & F Worldwide Corp.

Delaware Supreme Court
88 A.3d 635 (2014)

Kahn v. M & F Worldwide Corp.

Facts

MacAndrews & Forbes Holdings, Inc. (M & F) (defendant) was a 43 percent stockholder in its subsidiary, M & F Worldwide Corp. (Worldwide) (defendant). M & F bought the remaining common stock of Worldwide to fully own Worldwide and to take it private. This merger transaction was conditioned on receiving the approval of both (1) a special committee appointed by Worldwide’s board of directors and (2) a majority vote of Worldwide’s minority stockholders. The special committee and the minority stockholders approved the merger. Alan Kahn and other Worldwide minority stockholders (objectors) (plaintiffs) sued M & F and Worldwide, alleging they had breached fiduciary duties to the minority stockholders during the merger. The objectors claimed the merger’s validity should be reviewed using the entire-fairness standard. The objectors also argued that the merger was invalid because some special-committee members had social and business relationships with M & F. M & F and Worldwide argued the merger should be reviewed using the business-judgment rule. Under the business-judgment rule, the merger would be invalidated only if no rational person could have believed that the merger was favorable to Worldwide’s minority stockholders. The Delaware Court of Chancery dismissed the objectors’ claims. The objectors appealed.

Rule of Law

Issue

Holding and Reasoning (Holland, J.)

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