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Corporations Keyed to Rhee
Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc.
Citation:506 A.2d 173 (Del. 1986)
On August 14, Pantry Pride’s board authorized Perelman, chairman of the board of Pantry Pride, to acquire Revlon. On August 19, the Revlon board met to consider the impending threat of a hostile bid by Pantry Pride. Pantry Pride made its first hostile move on August 23 with a cash tender offer for all shares of Revlon at $47.50 per common share. The Revlon board advised the stockholders to reject the offer. On August 29, Revlon commenced its own offer for up to 10 million shares, exchanging for each share of common stock tendered one note of $47.50 principal. At this point, both the Rights and the Note covenants stymied Pantry Pride’s attempted takeover. Forstmann met on October 11 with Revlon’s special counsel and investment banker. On October 12, Forstmann made a new $57.25 per share offer, based on several conditions. The principal demand was a lock-up option to purchase Revlon’s Vision Care and National Health Laboratories divisions of $525 million. The Rights and Notes covenants had to be removed as in the October 3 agreement. The board unanimously approved Forstmann’s proposal because it was for a higher price than the Pantry Pride bid, it protected the noteholders, and Forstmann’s financing was firmly in place. PantryPride filed a complaint, challenging the lock-up, the cancellation fee, and the exercise of the Rights and Notes covenants.
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