Rabkin v. Philip A. Hunt Chemical Corporation

Olin Corp. (Olin) bought 63.4 percent of the outstanding shares of Philip A. Hunt Chemical Corporation (Hunt) (defendant) from Turner and Newall Industries, Inc. (Turner) for $25 a share. Olin’s purchase agreement with Turner required that if Olin acquired the remaining Hunt stock within one year, it would pay $25 per share for that stock as well. Olin had always intended to acquire the remaining Hunt stock, but did not act on that intention until right after one year had passed, thus avoiding the $25 per share requirement in the agreement with Turner. After the year had passed, Olin hired Morgan Lewis to render a fairness opinion on a purchase price of $20 per share. Morgan Lewis agreed that it was fair and Olin’s Finance Committee voted unanimously to propose a price of $20 per share for the remaining Hunt stock. Upon the merger proposal, the Hunt board appointed a committee to review its fairness. The committee’s advisor, Merrill Lynch, found that although $20 per share was fair, it was on the low end as the stock was worth somewhere between $19 to $25 per share. The committee recommended to Olin that it increase its offer, but Olin declined to act on the recommendation. The committee subsequently declared that $20 per share was fair and recommended approval of the merger. Rabkin, et al. (plaintiffs) brought suit challenging the merger. The plaintiffs claim that Olin manipulated the timing of its merger proposal to avoid the one year commitment price it had agreed to with Turner, thus costing the plaintiffs $4 per share. The Delaware Court of Chancery dismissed the plaintiffs’ claims, holding that absent fraud or deception, the plaintiffs’ only remedy was their appraisal right. The plaintiffs appealed.