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Business Associations Keyed to Bainbridge
Smith v. Van Gorkom
Citation:488 A.2d 858 (Del.Sup.Ct.1985)
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Trans Union was a publicly-traded, diversified holding company. During the period here involved, the Company had a cash flow of hundreds of millions of dollars annually. The Company, however, had difficulty in generating sufficient taxable income. On August 27, 1980, Trans Union CEO Jerome Van Gorkom met with senior management of Trans Union. Donald Romans, Chief Financial Officer of Trans Union, brought up the idea of a leveraged buy-out. At the meeting, Van Gorkom stated that he would be willing to take $55 per share for his own 75,000 shares. He vetoed the suggestion of a buy-out by management. Van Gorkom met with Jay Pritzker, a well-known corporate takeover specialist. Gorkom assembled a proposed per share price for sale of the company but did so without consulting the board or any members of the senior management. Senior management’s reaction to the Pritzker proposal was completely negative. Van Gorkom did not disclose to the board, however, the methodology by which he alone had arrived at the $55 figure.
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