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Court Of Chancery Explains Revlon Application In Mixed Consideration Offers

Posted In M&A

In re Smurfit-Stone Container Corp. Shareholder Litigation, C.A. 6164-VCP (May 20, 2011, revised May 24, 2011)

When does the Revlon doctrine apply when a takeover offer involves a mix of cash and stock?  After all, at least one Supreme Court decision suggests that if the stockholders will continue as part of a mix of all minority stockholders in the acquiring company, they may still be able to get a control premimum later and so Revlon does not apply.  This decision explains that even when the stockholders are being asked to take stock for some but not all of their shares that they still will lose the ability to get a control premimum for those shares to the extent they are sold for cash. Hence, Revlon applies and the board is required to get the best price possible for the stockholders in that transaction.

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