Paramount Communications Inc. v. QVC Network Inc.
Delaware Supreme Court
637 A.2d 34 (Del. 1994)
Paramount Communications Inc. (Paramount) (defendant) approved a merger agreement with Viacom Inc. (Viacom). The agreement contained various defensive measures, including the following: a no-shop provision, under which Paramount would not solicit any other offers, subject to certain exceptions; a termination fee provision, under which Viacom would be paid a $100 million termination fee if the merger was not consummated; and a stock option provision under which Viacom was granted an option to purchase about 19.9 percent of Paramount’s outstanding stock if the merger was not consummated. After the proposed merger was announced, QVC Network Inc. proposed an alternative merger to Paramount, whereby QVC would acquire Paramount for $80 per share. Upon hearing of this offer, Viacom sweetened its bid for Paramount, itself offering $80 per share. Paramount approved an amended merger agreement with Viacom, although the terms were largely similar to the original agreement and the defensive measures in place to make it hard for Paramount to effectuate an alternative transaction remained unchanged. Subsequently, Viacom unilaterally raised its offer to $85 per share and QVC followed with an offer of $90 per share. The Paramount board then made a final determination that the Viacom merger was in the better interests of the Paramount stockholders. QVC and Paramount stockholders (plaintiffs) brought suit and the Court of Chancery granted a preliminary injunction enjoining the Paramount merger with Viacom. Paramount appealed.
Rule of Law
Holding and Reasoning (Veasey, J.)