Tuesday, February 26, 2013

Hollinger, Inc. v. Hollinger International, Inc. case brief

Hollinger, Inc. v. Hollinger International, Inc. case brief summary
858 A.2d 342

FACTS: Petitioner controlling shareholder (CS) of respondent corporation requested the court to issue a preliminary injunction to prevent the corporation from selling leading newspapers and publications that the corporation (through wholly owned subsidiaries) published in England to a successful buyer who was the highest bidder. The action was brought under Del. Code Ann. tit. 8, § 271 and under equitable principles.

ISSUE: The key question was if the corporation's shareholders were required under § 271 to vote to approve (or disapprove) of the sale of "all or substantially all" of the corporation's property and assets. Without conclusively having to decide, the court assumed that § 271 applied to sales of assets owned directly and indirectly by its subsidiaries.

Under two-pronged Gimbel test, § 271 permitted the corporation's board to decide to sell one business without shareholder approval when other substantial businesses were retained. If quantitatively--as opposed to qualitatively--vital portions of the unsold businesses constituted substantial, viable, ongoing components of the corporation, then the sale was not subject to § 271.

-"Substantially all" did not simply mean more than 50 percent.
-Quantitatively measured, the unsold "Chicago Group" publications remained a viable ongoing component that produced about 50 percent of the corporation's value and earnings; so, a § 271 vote was not required.
-After CS's controlling shareholder's fiduciary breaches, and based on lawsuits reducing its control abilities, CS did not still retain some equitable right to veto the sale.

CONCLUSION: The court decided that (1) evidence did not indicate that the board breached its duty of care by deciding to sell publications without exploring other strategic opportunities, other complete or partial sales, or no sales; and (2) none of the shareholders had a statutory right to vote upon, nor did the CS have an equitable right to veto, the proposed sale of the publications to the buyer. The court denied the preliminary injunction.

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