506 A.2d 173 (Del. 1986)
-Pantry Pride wanted to acquire Revlon. Suggested price between $40-50/share, later made hostile tender offer of $45.
-Revlon’s investment banker advised directors that $45/share was grossly inadequate.
-Pantry Pride’s strategy was to acquire Revlon through junk bonds and break up Revlon and distribute assets making a profit.
-Pantry Pride made a series of hostile moves, each rejected.
-Revlon used defensive measures, “note purchase rights plan” and note covenants.
-Board eventually agreed to leveraged buyout by Forstmann. Pantry Pride offered $56.25, and Forstmann offered $57.25 per share (time value of money made it less).
-Pantry Pride asked for an injunction barring the consummation of an option allowing Forstmann from purchasing Revlon (lock-up option) as well as bar a no-shop provision from Revlon to Forstmann, and payment of a $25M cancellation fee to Forstmann if transaction was aborted.
-Ultimate responsibility for managing the business and affairs of a corporation falls on its board of directors.
-The responsive action taken must be reasonable in relation to the threat posed.
-The court looks at the poison pill, asks if it is reasonable. At the time it was adopted, the poison pill was said to be reasonable. It achieved the proper result, which was the raised bidding.
Poison Pill: a plan by which shareholders receive the right to be bought out by the corporation at a substantial premium on the occurrence of a stated triggering event.
-Can not play ‘favorites’ to a white-knight to the total exclusion of a hostile bidder when bidders make similar offers or when dissolution is inevitable.
-Here there was irreparable harm, Pantry Pride would have lost opportunity to bid unless injunction decreed.
Issues: The Revlon Doctrine, Poison Pill, Acquisitions
Revlon Inc. v. MacAndrews brief