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Business Associations Keyed to LoPucki, 2nd Ed.
Orman v. Cullman
Citation:
794 A.2d 5 (2002)Facts
General Cigar Holdings, Inc. was a Delaware corporation and leading manufacturer of premium cigars with a dual-class stock structure. The Cullman Group owned approximately 37% of the company’s total outstanding stock but controlled approximately 67% of the voting power through their ownership of Class B shares with 10:1 voting rights. In fall 1999, Swedish Match approached the Cullmans about purchasing the interest in General Cigar owned by public shareholders. After negotiations, a transaction structure was determined that included: (1) a sale by the Cullman Group of approximately one-third of its equity interest to Swedish Match at $15.00 per share; (2) a merger in which all shares held by unaffiliated shareholders would be purchased for $15.25 per share; (3) the Cullmans maintaining their positions as executives and having power to appoint a majority of the board; (4) the Cullman Group having put rights for its remaining equity interest after three years; and (5) a voting agreement by the Cullman Group. The board created a special committee of outside directors to evaluate the transaction, which negotiated a price increase from $15.00 to $15.25 per share for public shareholders. The board unanimously approved the transaction on January 19, 2000. The plaintiff alleged that a majority of the board was not disinterested or independent and that the board breached its disclosure duties in the proxy statement.
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