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Business Associations Keyed to Diamond, 6th Ed.
Jedwab v. MGM Grand Hotels, Inc.
Citation:
509 A.2d 584 (1986)Facts
MGM Grand Hotels, Inc., a Delaware corporation operating resort hotels and gaming establishments in Las Vegas and Reno, entered into a merger agreement with Bally Manufacturing Corporation. Under the agreement, all classes of MGM Grand’s stock would be converted to cash. The company had two classes of stock: common stock and Series A Redeemable Preferred Stock. The preferred stock had been created in 1982 through an exchange offer following a devastating fire at the MGM Grand Hotel-Las Vegas in 1980. Kirk Kerkorian, through his company Tracinda Corporation, owned approximately 69% of the common stock and 74% of the preferred stock.
In the proposed merger, public common shareholders would receive $18 per share, while preferred shareholders would receive $14 per share. Kerkorian himself would receive only $12.24 per share for his common stock, along with certain non-cash consideration including rights to use the MGM Grand name and rights to proceeds from pending insurance litigation. Kerkorian negotiated the deal with Bally, which offered a total price of $440 million for all of MGM Grand’s equity. The plaintiff, a preferred shareholder, alleged that the merger unfairly allocated the proceeds between the two classes of stock.
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