Corporations Keyed to Klein
Weinberger v. UOP, Inc
Facts
Signal sold off a subsidiary company for $420 million in cash and desired to turn around and reinvest the money. In 1975, Signal decided to purchase a majority stake in UOP. Signal paid $21 per share (it was trading at around $14) to obtain 50.5% of UOP’s shares. In 1978, Signal still had a great deal of money left over, and with no other attractive investments they decided to acquire all remaining shares of UOP. At this point, Signal had placed seven directors, including the president and CEO James Crawford, on the 13-member board. Two directors that served on both the board of Signal and of UOP, Charles Arledge and Andrew Chitiea, performed a study using information obtained from UOP that determined it would be in Signal’s interest to get the remaining shares of UOP stock for anything under $24 per share. The Signal board decided to offer between $20-21. Signal discussed the proposal with Crawford, and he thought the price was generous, provided that employees of UOP would have access to decent benefits under Signal. He never suggested a price over $21. Crawford hired James Glanville to render a fairness opinion despite the fact that Glanville’s firm also did work for Signal. Glanville also had a short amount of time to prepare the opinion, and his number was the same as Signal’s. The UOP board, using the fairness opinion as its guide but not the Arledge-Chitiea study, voted unanimously to recommend the merger.
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