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Corporations Keyed to O’Kelley
Klang v. Smith’s Food & Drug Centers, Inc.
Citation:
702 A.2d 150 (1997)Facts
Smith’s Food & Drug Centers, Inc. (SFD) owns and operates a chain of supermarkets. Jeffrey P. Smith, SFD’s Chief Executive Officer, began to entertain suitors with an interest in acquiring SFD. At the time, and until the transactions at issue, Mr. Smith and his family held common and preferred stock constituting 62.1% voting control of SFD. On January 1996, SFD entered into an agreement with the Yucaipa Companies. SFD hired the investment firm of Houlihan Lockey Howard & Zukin to examine the transactions and render a solvency opinion. Houlihan eventually issued a report to the SFD board replete with assurances that the transactions would not endanger SFD’s solvency, and would not impair SFD’s capital in violation of the Delaware statute, in reliance on the Houlihan opinion, SFD’s board determined that there existed sufficient surplus to consummate the transactions and enacted a resolution proclaiming as much. On May 1996, SFD’s stockholders voted to approve the transactions, which closed on that day. The self-tender offer was oversubscribed, so SFD repurchased fully fifty percent of its shares at the offering price of $36 per share.
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