Kahn v. M & F Worldwide Corp.
Delaware Supreme Court
88 A.3d 635 (Del. 2014)
MacAndrews & Forbes Holdings, Inc. (defendant), a 43% stockholder in M & F Worldwide Corp. (MFW), proposed to buy out the remaining public stock and take MFW private. From the start, the deal was conditioned on two protections: approval by a special committee appointed by the MFW board, and approval by a majority vote of the minority stockholders. The special committee approved the deal, and the minority stockholders voted to approve the merger. Kahn and other minority stockholders (plaintiffs) sued, arguing entire fairness should still apply because even both protections together can't fully guard against a timid special committee or improperly influenced shareholders, and separately alleging the special committee wasn't truly independent given various relationships between its members and M & F. The Court of Chancery ruled for M & F, and the plaintiffs appealed.
Whether the business judgment rule is the proper standard of review for a merger between a controlling stockholder and its subsidiary that is conditioned from the outset on both approval by an independent, adequately empowered special committee that fulfills its duty of care and the uncoerced, informed vote of a majority of the minority stockholders.