Corporations Keyed to Klein
Santa Fe Industries, Inc. v. Green
Facts
Defendant acquired a 60% share in Kirby in 1934. By 1974, Defendant owned 95% and wanted to own the entire 100%. Defendant utilized Delaware’s short-form merger statute that allowed a parent corporation owning at least 90% of the stock to merge with the subsidiary and force the minority shareholders to sell their shares. The minority shareholders must be notified within ten days, and Defendant did so in this case. Defendant offered $150 per share after it was valued by Morgan Stanley at $125. However, Kirby’s assets were valued to be $640 per share. Delaware law allows a minority shareholder to petition the Delaware Court of Chancery if they believe the payout is unfair. Instead, Plaintiffs brought an action under federal law, claiming that the majority owed a fiduciary duty to the minority, and that breach violated Rule 10b-5. The trial court believed that fiduciary duty breaches were not covered under the federal law, but the Court of Appeals reversed, concluding tha t it was within the purview of the federal law.
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