Sunday, November 24, 2013

Paramount Communications, Inc. v. Time Incorporated case brief

Paramount Communications, Inc. v. Time Incorporated case brief summary
571 A.2d 1140 (Del. 1989)


CASE SYNOPSIS
Plaintiff shareholders appealed a judgment from the Chancery Court, New Castle (Delaware), which denied their application to preliminarily enjoin defendant corporation from concluding a merger.

CASE FACTS
Plaintiff shareholders filed suits against defendant corporation seeking a preliminary injunction to halt defendant's offering of shares in preparation of a merger. The lower court denied plaintiffs' motion on the grounds that defendant did not breach the business judgment rule in making a tender offer.

DISCUSSION

  • On appeal, plaintiffs asserted that defendant's tender offer triggered a Delaware merger precedent, requiring defendant to maximize shareholder value before the merger. 
  • The state supreme court affirmed the lower court, holding that defendant reasonably responded to a competing offer in a reasonable and proportionate manner. 
  • Further, defendant's response in creating a merger would not place the transaction in violation of the business judgment rule where plaintiffs' alleged a corporate threat solely centered on inadequate stock value.

CONCLUSION
The state supreme court affirmed the lower court's dismissal of plaintiffs' request for a preliminary injunction on the ground that defendant's decision to initiate a merger was made in a reasonable and proportionate fashion.

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