The Court declared that, in certain limited circumstances indicating that the "sale" or "break-up" of the company is inevitable, the fiduciary obligation of the directors of a target corporation are narrowed significantly, the singular responsibility of the board being to maximize immediate stockholder value by securing the highest price available. -Was reasonable in relation to threat perceived until Pantry Pride increased offer to $50/share. See Revlon, 506 A.2d at 180 (stating that in responding to a takeover, the board must ensure that its responsive action is reasonable). v. MACANDREWS & FORBES HOLDINGS, INC. N June 1985 the corporate heads of Pantry Pride, Inc. and Revlon, Inc. privately met to discuss Pantry Pride's friendly acquisition of Revlon.' 506 A.2d 173 (Del. The special injury rule would deem a shareholderâs Revlon claim to be derivative, which makes no sense. The first of these passages explains that, When Pantry Pride increased its offer to $50 per share, and then to $53, it became apparent to all that the break-up of the company was inevitable. Suggested price between $40-50/share, later made hostile tender offer of $45. Help Support This Site: Please Donate Your Old Notes and Outlines! The sum total of cost of these books may seem high, but they dwarfed by the tangible gain received by finishing high in your class. Disclosure: Some of the above links may be affiliate links. The Court was not swayed by defendants' claims that its concessions to Forstmann in fact resulted in a higher price than would otherwise have been available, while simultaneously enhancing the interests of noteholders by shoring up the sagging market for its outstanding notes. Think, for example, of the famous Revlon duty to use appropriate efforts to maximize shareholder benefits when a publicly traded corporation is destined to be sold. During a merger, the board of the target company primarily has a duty to maximize the company's value at sale. Suggested price between $40-50/share, later made hostile tender offer of $45.-Revlonâs investment banker advised directors that $45/share was grossly inadequate.-Pantry Prideâs strategy was to acquire Revlon through junk bonds and break up Revlon ⦠In such a context, that conduct can not be judicially reviewed pursuant to the traditional business judgment rule, but instead will be scrutinized for reasonableness in relation to this discrete obligation. Directors owe fiduciary duties of care and loyalty to the corporation and its shareholders. Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (Del. CEO Ronald Perelman of Pantry Pride approached the Revlon corporation, proposing either a negotiated transaction or, if necessary, a hostile tender offer, at a price of between $42 and $45 per share. The business judgment rule provides a rebuttable presumption "that in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company. -Pantry Pride wanted to acquire Revlon. 1986) FACTS Pantry Pride, Inc. (Pantry Pride) sought to acquire Revlon, Inc. (Revlon). Essential Guides and Hornbooks for Law School, © 2010 - 2020 lawschoolcasebriefs.net. Revlonâs CEO turned down the initial offers. 4 th 157, Fed. Equity-Linked Investors, LP v. Adams, 705 A.2d 1040, 1054 (Del. The directors' role changed from defenders of the corporate bastion to auctioneers charged with getting the best price for the stockholders at a sale of the company.[4]. 2007). Pantry Pride promptly raised the price of its offer to $56.25 per share. -Rights plan, at time of adoption, afforded a measure of protection consistent with director’s fiduciary duty in facing a takeover threat perceived as detrimental to corporate interests. The terms of the proposed deal importantly included a waiver of the restrictive covenants contained in the notes issued by Revlon in the earlier repurchase. Now it was no longer charged with protecting the shareholders and the corporate entity from perceived threats to its ability to continue to perform, but instead became obligated to the maximize the company's immediate monetized value for the benefit of shareholders. This video is about "Revlon, Inc v MacAndrews & Forbes Holdings, Inc". This significantly altered the board's responsibilities under the Unocal standards. Mar. Aronson v. Lewis, 473 A.2d 805, 812 (Del. Revlon, Inc. v. MacAndrews & Forbes Holdings, 506 A.2d 173 (Del. See Omnicare v. NCS Healthcare, Inc. 818 A.2d 914 (Del. Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173, was a landmark decision of the Delaware Supreme Court on hostile takeovers. The court here uses Unocal standards: Requiring directors to determine the best interests of corporation/stockholders, and impose an enhanced duty to abjure any action that is motivated by considerations other than a good faith concern for such interests. 1986) | 506 A2d 173 | March 13, 1986 | Brett Johnson ANNOTATION DISPLAY Print Bookmark Annotated Case Font Settings Clone "[2] Accordingly, the board's actions are evaluated in a different frame of reference. Revlon has developed a long-standing reputation as a color authority and beauty trendsetter in the world of color cosmetics and hair care. The CEOs of the two companies held strong personal differences. Enclosed is a brief note discussing in general terms how a board of directors may satisfy its duties under the well-known decision of the Delaware Supreme Court in Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (Del. Pantry Pride, Inc. (Pantry Pride) (plaintiff) sought to acquire Revlon, Inc. (Revlon) (defendant) and offered $45 per share. CitationRevlon, Inc. v. Macandrews & Forbes Holdings, Inc., 506 A.2d 173, 1986 Del. See id. (stating "care, loyalty and independence" are principles a board must satisfy). Sec. This page was last edited on 6 October 2020, at 14:13. The opinion provides two main passages meant to guide the actions of future boards, regarding when duties attach that lead to enhanced judicial scrutiny. REVLON, INC. V. MACANDREWS & FORBES HOLDINGS, INC. 506 A.2d 173 (1986) NATURE OF THE CASE: This was a fight over the control of Revlon, Inc. Revlon (D) directors appealed the grant of a preliminary injunction to MacAndrews (P) shareholders, which held that Ds breached their duty of care in making concessions during a corporate auction. To prevent the hostile tender offer, the Revlon board promptly undertook defensive action. Mar. The Revlon board assuaged Forstmann's concern. "[9] Thus, at bottom, the business judgment rule reflects little more than process inquiry. During this same period, the Revlon board had commenced discussions with Forstmann, Little regarding a possible leveraged buyout led by Forstmann as an alternative to the acquisition by Pantry Pride. 1997) (tracing the history of Revlon duties and concluding that one view of Revlon led to a severe curtailment in the range of board business discretion). The Delaware Supreme Court affirmed the judgment below. Revlon v. MacAndrews & Forbes (Del. Revlon's board rejected the negotiated transaction, fearing that the acquisition would be financed by junk bonds and result in the corporation's dissolution. Subsequent cases such as Paramount v. Time (the Time Warner case) and Paramount v. QVC addressed when a board assumes the Revlon duty to auction the company and forego defensive measures that would otherwise be permissible under Unocal. This opinion was written by Justice Andrew G.T. In response to the tender offer, Revlon adopted a poison pill plan and made a self-tender offer for over 33% of its outstanding shares. See id. 13, 1986) Brief Fact Summary. The place for complete law school case briefs and law-related news. The duty of the board had thus changed from the preservation of Revlon as a corporate entity to the maximization of the company's value at a sale for the stockholders' benefit.
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