Delaware Supreme Court Affirms Holding That Business Judgment Rule Applies When Informed Majority Of Stockholders Tenders Shares In A Two-Step Merger
On February 9, 2017, the Supreme Court of the State of Delaware affirmed the dismissal of a breach of fiduciary duty action brought by former shareholders of Volcano Corporation in connection with the acquisition of Volcano in a two-step all-cash tender offer and merger pursuant to Delaware General Corporation Law Section 251(h). In re Volcano Corp. Stockholder Litig., C.A. No. 10485-VCM (Del. Feb. 9, 2017). Without further elaboration, the Court’s brief order provides: “it appears to the Court that the judgment of the Court of Chancery should be affirmed for the reasons stated in its decision.” Id. at *1 (citing In re Volcano Corp. Stockholder Litig., 143 A.3d 727 (Del. Ch. 2016)). As discussed in our post regarding that decision, the Chancery Court had held that because a fully informed, uncoerced majority of stockholders had tendered their shares during the first step of the two-step merger, the business judgment rule irrebuttably applied to the board’s decision to approve the merger.