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Business Associations Keyed to Coffee, 9th Ed.
Virginia Bankshares, Inc. v. Sandberg
Citation:
501 U.S. 1083, 111 S. Ct. 2749, 115 L. Ed. 2d 929 (1991)Facts
In December 1986, First American Bankshares, Inc. (FABI) initiated a “freeze-out” merger in which its wholly owned subsidiary, Virginia Bankshares, Inc. (VBI), would acquire the First American Bank of Virginia. VBI already owned 85% of the Bank’s shares, with the remaining 15% held by approximately 2,000 minority shareholders. FABI hired the investment banking firm Keefe, Bruyette & Woods (KBW) to determine an appropriate price for the minority shares. Based on market quotations and unverified information from FABI, KBW recommended $42 per share as a fair price. Although Virginia law only required that the merger proposal be submitted to a shareholder vote with prior circulation of information, the directors solicited proxies, stating they approved the merger because it provided an opportunity for minority shareholders to achieve a “high” and “fair” value for their shares. Evidence at trial showed that the directors knew this price was inadequate, as the Bank’s real estate holdings were undervalued and its “going concern” value exceeded $60 per share. The market for the Bank’s shares was also closed, thin, and dominated by FABI—facts omitted from the proxy statement. Sandberg did not provide her proxy, and after the merger’s approval, she sued VBI, FABI, and the Bank’s directors for violating § 14(a) and breaching fiduciary duties. A jury found for Sandberg on both counts and awarded $18 per share in damages.
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