Orman v. Cullman
Delaware Court of Chancery
2004 Del. Ch. LEXIS 150 (2004)
General Cigar Holdings, Inc. (General) was a public company founded by the Cullman family. Edward Cullman, Sr. and Jr. (the Cullmans) (defendants) controlled General through ownership of Class B common stock. Swedish Match AB (Swedish) and General agreed to a merger that would give Swedish 64 percent and the Cullmans 36 percent of General. The terms included: (1) Swedish would pay the Cullmans $15.25 per share for one-third of their interest; (2) General would be merged into a Swedish subsidiary; (3) public shareholders would receive $15.25 per share; (4) at Swedish’s insistence, a lock-up provision would require the Cullmans to vote their Class B shares for the merger and against any alternative proposal for 18 months if the merger terminated; and (5) a fiduciary out would permit the board to withdraw its recommendation of the merger. The voting agreement did not bind the Cullmans as officers and directors nor prohibit General’s board from considering other proposals. There were no other potential buyers. After the merger was approved, Joseph Orman (plaintiff), a Class A common stockholder, sued General’s board of directors for breach of their fiduciary duties in negotiating the merger terms.
Rule of Law
Holding and Reasoning (Chandler, J.)
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