Mills Acquisition Co. v. Macmillan, Inc.

The Macmillan, Inc. (defendant) board of directors approved an auction for control of the company. Ordinarily, such an auction might have been conducted by the board’s outside investment advisor. In this case, however, the board left all the details up to Macmillan’s chief executive officer (CEO), who had a personal financial interest in the auction’s outcome. The CEO handpicked the advisors who conducted the auction and manifested a clear intention to skew the auction process for the benefit of Kohlberg Kravis Roberts & Company (Kohlberg) and against Robert Maxwell (plaintiff), a bidder whom the CEO particularly disliked. For example, at the CEO’s direction, the auction advisors reversed their earlier recommendation and rejected Maxwell’s first bid even though the bid offered a fair price for Macmillan’s stock. In addition, the advisors tipped off Kohlberg as to the price Maxwell named in his second offer. Predictably, Kohlberg won the auction. Maxwell, in the name of his Mills Acquisition Company (plaintiff), petitioned for a preliminary injunction blocking the Kohlberg acquisition. The Delaware Court of Chancery acknowledged that Macmillan’s directors and CEO had acted improperly. Nevertheless, the chancery court denied the petition on the grounds that this misconduct neither misled Maxwell nor deterred him from submitting a winning bid. Maxwell appealed to the Delaware Supreme Court.