Delaware Supreme Court
457 A.2d 701 (Del. 1983)
The Signal Companies, Inc. (Signal) acquired 50.5 percent of UOP, Inc.’s (UOP) (defendants) outstanding stock. Signal elected six members to the new board of UOP, five of which were either directors or employees of Signal. After the acquisition, Signal still had a significant amount of cash on hand due to a sale of one of its subsidiaries. Signal was unsuccessful in finding other good investment opportunities for this extra cash so it decided to look into UOP once again. Charles Arledge and Andrew Chitiea, two Signal officers who were also UOP directors, conducted a “feasibility study” for Signal and determined that the other 49.5 percent of UOP would be a good investment for Signal for any price up to $24 per share. The study found that the return on investment at a purchase price of $21 per share would be 15.7 percent, whereas the return at $24 per share would be 15.5 percent. Despite this small difference in return, the difference in purchase price per share would mean a $17 million difference to the UOP minority shareholders. This information was never passed along to Arledge and Chitiea’s fellow UOP directors or the UOP minority shareholders. The UOP board agreed on a $21 per share purchase price. The UOP minority shareholders subsequently voted in favor of the merger. Weinberger, et al. (plaintiffs) were UOP minority shareholders and brought suit, challenging the merger. The Delaware Court of Chancery found in favor of the defendants. The plaintiffs appealed.
Rule of Law
Holding and Reasoning (Moore, J.)
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