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Business Associations Keyed to Coffee, 9th Ed.
Mendel v. Carroll
Citation:
651 A.2d 297 (1994)Facts
The Carroll Family historically controlled Katy Industries, owning between 48% and 52% of the company’s stock. In March 1993, the Carroll Family offered to purchase all non-Carroll shares at $25.75 per share. The board’s Special Committee recommended this offer after determining it was fair. In September 1993, Pensler proposed to purchase all shares for at least $29.00 per share, subject to due diligence and financing. The Carroll Family reiterated they had no interest in selling their shares. In December 1993, the Carroll Family withdrew their merger offer and certain family members purchased additional shares in the market, bringing their ownership to 50.6%. Pensler then offered $27.80 per share but conditioned the offer on receiving an option to purchase up to 1.8 million authorized but unissued shares, which would dilute the Carroll Family’s control. The Special Committee sought legal opinions on whether granting such an option would breach fiduciary duties to the controlling shareholders. After receiving an inconclusive opinion, the board declined to grant the option and instead recommended a special $14.00 per share dividend to enhance shareholder value.
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