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Court of Chancery Explains Tender Offer/ Merger Review Standard

Posted In M&A

In Re CNX Gas Corporation Shareholders Litigation, C.A. 5377-VCL (May 25, 2010)

This is an important decision explaining the standard of review that the Court will apply in various circumstances involving a tender offer by a majority stockholder that is to be followed by a cash out merger.  Briefly, if the minority stockholders are effectively represented by a special committee with real bargaining power and the merger is subject to approval by disinterested stockholders, then the business judgment rule will apply and not entire fairness review.

Sometimes it is difficult to understand the Delaware corporate law. The law is constantly evolving. The evolution is often through long, closely reasoned opinions and there are a lot of those opinions to digest. This decision then is particularly helpful in doing the work of consolidating the past decisions into one unified approach.

It is also an interesting example of the depth of research and thinking that goes into the decisions of the Court of Chancery.  Actually, it is a little scary because it is hard to believe that we practitioners can ever get ahead of the Court .

Tags: M&A


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