In GAMCO Asset Management v. iHeartMedia, Delaware’s Court of Chancery considered claims that a controlling stockholder’s liquidity needs created conflicts in otherwise arm’s-length transactions with third parties. As demonstrated in New Jersey Carpenters Pension Fund v. infoGROUP, a controlling stockholder that receives the same financial benefit as the minority stockholders must also receive a “unique benefit” for the challenged transaction to be subjected to the entire fairness standard of review. Circumstances like infoGROUP, however, represent extreme cases. As discussed below, the plaintiff in iHeartMedia was unable to persuade the court that infoGROUP-like circumstances existed in its case.

GAMCO was a stockholder of Clear Channel Outdoor Holdings Inc. (CCOH) at the time it initiated its derivative action, holding roughly 9.9 percent of CCOH’s Series A common stock. Defendant iHeartCommunications Inc. (iHC) owned approximately 90 percent of CCOH’s outstanding stock and nearly 99 percent of CCOH’s voting power. IHC is a wholly owned subsidiary of defendant iHeartMedia Inc. (iHM). In December 2015, CCOH announced that, through an indirect wholly-owned subsidiary, CCOH would issue $225 million in 8.75 percent senior notes maturing in 2020 through which CCOH’s subsidiary would receive $217.8 million in net proceeds (the note offering). Only days following the announcement, CCOH declared a special cash dividend for the entire $217.8 million, payable pro rata to holders of all Class A and Class B common stock. In the first quarter of 2016, CCOH entered into a series of asset sales that generated $602 million (the asset sales). Subsequently, CCOH declared a special cash dividend to all Class A and Class B common stockholders in the amount of $540 million.

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