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Paramount Communications, Inc. v. Time, Inc.
Citation:
571 A.2d 1140 (Del. 1989).Facts
In the early 1980s, Time identified a need to expand beyond journalism into the entertainment industry in order to survive. In 1987, Time focused its attention on Warner and by July 1988 was convinced that Warner was the best fit for its expansion. Finally, on March 3, 1989, Time and Warner signed a stock-for-stock merger agreement. The agreement included a name change to “Time-Warner Corporation” and a complex plan for retaining top management from both companies.
On June 7, 1989, Paramount announced a $175 per share cash bid for all of Time’s shares, contingent on termination of the Time-Warner merger agreement. Time’s board rejected the offer as grossly inadequate and concluded that the Warner deal was better for the corporation’s strategic goals. After rejecting the offer, Time’s management became concerned that shareholder’s would in turn reject the Time-Warner deal in hopes of tendering the Paramount cash offer. Therefore, Time and Warner abandoned the stock-for-stock merger agreement and Time made a friendly cash tender offer to Warner which would effectuate a merger between the companies at closing. The agreement was identical to the original except for the fact that Time would have to borrow $10 billion, making it an unattractive acquisition for Paramount.
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