When is an extended family a control block? In Buttonwood Tree Value Partners v. R.L. Polk & Co., C.A. No. 9250-VCG (Del. Ch. Ct. July 24), the Delaware Court of Chancery acknowledged that while familial relations among a group of stockholders are not per se sufficient to establish a controlling stockholder block, a family that regularly refers to itself as a single unit may constitute a controlling stockholder block.

Background

R.L. Polk & Co., Inc. (the company) was a Delaware corporation owned and controlled by the Polk family since 1870. By 2010, the family had grown in size over multiple generations and collectively owned 90.5 percent of the company among 51 family members, with the remaining 9.5 percent owned by unaffiliated stockholders. Three of the seven directors on the company's board were Polk family members.

In late 2010, the board appointed a special committee to explore conversion of the company to Subchapter S status. After some initial valuation and structural analysis, Stephen Polk, the company's chairman and CEO, advised the board on March 9, 2011, that the Polk family was not interested in pursuing a restructuring short form merger. The board chose to instead pursue a share buyback from all stockholders who wished to tender shares, and the company engaged Stout Risius Ross, Inc. (SRR) to provide a fairness opinion.

Prior to the self-tender, the company's stock had traded in the $600–$650 per share range. On March 28, 2011, SRR determined that the proposed price of $810 per share (valuing the company at $434.5 million) was fair to the tendering stockholders. The board approved but did not recommend the self-tender, with the Polk family directors abstaining from voting.