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Business Associations Keyed to Coffee, 9th Ed.
Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc.
Citation:
506 A.2d 173 (1986)Facts
In June 1985, Ronald Perelman of Pantry Pride approached Michel Bergerac of Revlon to discuss a friendly acquisition at $40-50 per share, which Revlon rejected as inadequate. After further rebuffs, Pantry Pride initiated a hostile tender offer at $47.50 per share in August 1985. Revlon’s board adopted defensive measures, including a poison pill (Rights Plan) and a self-tender for 10 million shares in exchange for notes and preferred stock. The notes contained protective covenants limiting Revlon’s ability to incur additional debt or sell assets.
As Pantry Pride increased its offers ($50, then $53, then $56.25), Revlon negotiated with Forstmann Little as a white knight. On October 3, Revlon agreed to a leveraged buyout by Forstmann at $56 per share. When this was announced, the market value of the previously issued notes began to fall, prompting threats of litigation from noteholders.
On October 12, Revlon accepted a revised Forstmann offer of $57.25 per share, which included provisions to support the value of the notes. This agreement included a lock-up option allowing Forstmann to purchase two Revlon divisions at a substantial discount, a no-shop provision preventing Revlon from seeking other bids, and a $25 million cancellation fee. Pantry Pride responded by raising its bid to $58 per share and seeking an injunction against the Forstmann agreement.
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