In three important cases challenging a board of directors’ decision to sell the company, the Delaware Court of Chancery has recently reaffirmed that it will not second-guess the business judgment of properly advised public-company boards that do not suffer from a conflict of interest. The cases show yet again that Delaware corporate law will defer to the judgment of disinterested boards acting with impartial advice, even when that judgment results in the rejection of a nominally higher bid. But the message is equally clear that the Court of Chancery will carefully review corporate sales processes and intervene when it appears that a board or its financial advisers have a conflict of interest — even if no other bids are on the table.

The first of the decisions involved the recent auto-rental industry merger between Dollar Thrifty Automotive Group Inc. and Hertz Global Holdings Inc. Dollar Thrifty agreed to be acquired by Hertz for cash and stock valued at $41 per share, a premium of 5.5% above the company’s previous trading price. Avis Budget Group Inc. — Hertz’s traditional rival — then swooped in with a bid of $46.50 per share, but, unlike Hertz, was unwilling to pay a fee to Dollar Thrifty if antitrust regulators nixed the proposed deal. Dollar Thrifty’s board decided to stick with the Hertz offer. Shareholders sued, alleging that the Dollar Thrifty board had followed a flawed process that favored Hertz and failed to fetch the highest possible price.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]