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Business Associations Keyed to Hwang, 3rd Ed.
Smith v. Van Gorkom
Citation:
488 A.2d 858 (1985)Facts
Trans Union Corporation was a publicly-traded diversified holding company with a railcar leasing business generating substantial cash flow but facing difficulty utilizing investment tax credits (ITCs). Chairman and CEO Jerome Van Gorkom, approaching mandatory retirement age, unilaterally decided to propose selling the company. Without consulting the Board or senior management, Van Gorkom selected a price of $55 per share based solely on calculations showing this price would support a leveraged buy-out. He approached Jay Pritzker with this specific price, negotiated basic terms over several days, and called a special Board meeting on one day’s notice. At the two-hour September 20, 1980 meeting, Van Gorkom presented the proposal orally without providing directors copies of the merger agreement. The Board approved the merger that same day without obtaining a fairness opinion, valuation study, or adequate information about the company’s intrinsic value. Senior management opposed the deal, believing the price was too low. Despite subsequent amendments and a “market test” period, no superior offer emerged, and shareholders approved the merger on February 10, 1981, with 69.9% voting in favor.
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