Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc.

Pantry Pride, Inc. (Pantry Pride) (plaintiff) sought to acquire Revlon, Inc. (Revlon) (defendant) starting at $45 per share, which Revlon rejected as inadequate, taking defensive steps and eventually negotiating a competing leveraged buyout with Forstmann Little & Co. (Forstmann) (defendant) as Pantry Pride kept raising its bid. Under the Revlon-Forstmann deal, stockholders would get $56 per share and Forstmann would assume Revlon's debts, including waiving covenants tied to notes Revlon had issued, causing those notes' market value to plummet and noteholders to threaten suit. When Pantry Pride topped that offer at $56.25 per share, Forstmann raised its own bid to $57.25 per share, but conditioned on a lock-up option letting Forstmann buy part of Revlon well below market value if another bidder acquired 40 percent of Revlon's shares, plus a no-shop clause requiring Revlon to deal exclusively with Forstmann; in exchange, Forstmann agreed to support the notes' value. Revlon's board approved this deal, and Pantry Pride sued, challenging the lock-up option and no-shop provision; the Court of Chancery found the board breached its duty of loyalty and enjoined the transaction, and the defendants appealed.