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Citing MFW, Court of Chancery Dismisses Merger Challenge

Smart Local Unions and Councils Pension Fund v. BridgeBio Pharma, Inc., C.A. No. 2021-1030-PAF (Del. Ch. Dec. 29, 2022)
Typically, the “entire fairness” standard of review applies to any transaction in which a controlling stockholder acquires the outstanding minority shares. But, under the MFW framework, the more lenient business judgment standard of review may apply if the controller can establish that, among other things, an independent, fully-empowered special committee met its duty of care to negotiate a fair price for the shares and also that an informed, uncoerced majority of the minority stockholders approved the transaction. 

Here, the Court concluded that the case fell within MFW, and as a result, dismissal was appropriate. Among other rulings, the Court rejected the plaintiff's argument that the special committee did not meet its duty of care because it did not pursue more forcefully a transaction with a third party who had offered a higher price than the controller. The pleaded facts showed that, even though the controller did not want to sell its shares to the third party, the special committee considered the third party's proposals, engaged with the third party and the controller, and even encouraged the controller and the third party to negotiate. In the Court’s view, these efforts undercut any inference that the committee was grossly negligent in its duties or that it violated its duty of care.

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