TW Services v. SWT Acquisition Corp.
Delaware Court of Chancery
Fed. Sec. L. Rep. (CCH) ¶ 94334 (1989)

- Written by Rich Walter, JD
Facts
SWT Acquisition Corp. (SWT) (plaintiff) acquired 19 percent of the shares in TW Services Inc. (TW) (defendant). SWT then issued a tender offer to purchase TW’s remaining shares. Closing on the offer would require TW’s board of directors (board) to approve an agreement to merge TW into SWT. It was in the best short-term interest of TW’s shareholders to accept SWT’s offer. However, in light of SWT’s background and recent dealings with TW, TW’s board perceived SWT’s tender offer as a bad-faith attempt either to maximize the value of SWT’s existing 19 percent stake or to force TW into paying so-called greenmail to buy out SWT. The board deemed either outcome a threat to TW’s long-term financial stability and corporate strategy. The board adopted a poison pill to fend off merging with SWT and subsequently refused SWT’s demand to redeem that poison pill. SWT petitioned the Delaware Court of Chancery for a preliminary injunction forcing redemption.
Rule of Law
Issue
Holding and Reasoning (Allen, J.)
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