Contest for Corporate Control: Unocal/Revlon
Are there any Revlon Triggers?
Is there a cash
merger/bust
up?
Has the company
affirmatively
decided to sell?
No
Yes
No
Is there a
change in
control?
Yes
No
Yes
Apply Revlon:
Board must try to maximize
SH value; satisfied if board
is unconflicted, informed,
and tried to get best price
(Lyondell)
No
Is the company
pursuing a preexisting long-term
business plan?
Breached if Board favors
themselves (conflict of
interest) over SHs (Revlon)
Yes
Board breaches duty of
care if it isn’t adequately
informed (doesn’t take
enough time) but that is
usually waived under
102(b)(7) so have to prove
board is conflicted or
purposely didn’t try to get
best price
Is there is a change of
control?
- Switching from
dispersedly held to
controlled (QVC), or
- Switching controllers
Yes
No
It is a dispersedly held
firm remaining
dispersedly held
(Time/Warner)
Apply Unocal Test:
1) Was there a reasonable threat?
a. Low price + fear that SHs
will take low price instead
of listening to board’s
valuation
2) Was the board’s response
proportional to the threat?
a. If board essentially gave
someone a veto vote, that
looks preclusive and fails
second part of test.
b. Coercing shareholder vote
without fiduciary out
clause fails the second part
of Unocal because it makes
it impossible for target to
get a higher price; this
would pass Revlon though
if it induces a higher bid
(Omnicare)
c.
Any attempt to manipulate the
voting structure requires a
compelling justification (Blasius)