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Kahn v. Lynch Communication Systems, Inc.
Citation:
638 A.2d 1110 (Del. 1994).Facts
Lynch was a telecommunications company. In the spring of 1986, Lynch determined a need to obtain fiber optic technology and identified a specific company, Telco Systems, for acquisition. At this time, Alcatel owned 43.3% of Lynch’s outstanding stock, designated five of its eleven board members, two of three executive committee members, and two of four members of the compensation committee. Therefore, Lynch needed Alcatel’s consent to proceed with a Telco transaction. Alcatel opposed the transaction and instead proposed a combination with Celwave Systems, Inc., another subsidiary of Alcatel’s French parent company: Compagnie Generale d’Electricite. Lynch’s board convened an Independent Committee to negotiate a transaction with Celwave, and ultimately opposed the merger finding the alleged benefits of a Celwave transaction to be overvalued.
On November 4, 1986, Alcatel responded to the Independent Committee’s decision by withdrawing the Celwave proposal and offering to acquire the entire equity interest in Lynch at $14 per share. On November 7, the board revised the mandate of the Independent Committee, authorizing it to negotiate a cash merger with Alcatel. The Committee immediately determined that $14 per share was inadequate and, after negotiations, Alcatel made a final offer of $15.50 per share. Alcatel further advised that it would proceed with an unfriendly tender offer at a lower price if the $15.50 per share was not recommended and approved. Thereafter, the Independent Committee unanimously approved the $15.50 per share price, as did the remainder of the board.
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