Weinberger v. UOP, Inc.

UOP, formerly known as Universal Oil Products Company, was a publicly traded company on the New York Stock Exchange. In 1974, Signal acquired 50.5% of UOP’s share at $21 per share. Of UOP’s 13 member board, Signal nominated six members with five of these also being directors or employees of Signal. In 1975, when UOP’s president and CEO retired, Signal caused him to be replaced with James Crawford, a longtime employee and vice president of one of Signal’s wholly-owned subsidiaries.

In 1977, Signal began looking for investments for its excess cash. In February 1978, Signal looked into acquiring UOP and two Signal officers, Charles Arledge and Andrew Chitiea conducted a feasibility study. Arledge and Chitiea were also UOP directors. The pair determined that acquisition of the remaining UOP shares at any price up to $24 would be a good investment. Following discussions, Signal’s executive committee decided to try to acquire UOP’s outstanding stock through a cash-out merger in the range of $20 to $21.

An executive meeting was set for February 28, 1978 and Crawford was invited to attend. Crawford thought that the proposed price was “generous” and mentioned only concerns about possible internal problems at UOP and assurances needed for UOP employees. Signal then proposed that the offer be presented to UOP’s board of directors on March 6, 1978, a mere four business days. During that time, Crawford spoke with UOP’s non-Signal affiliated directors and retained the Lehman Brothers to give an opinion the fairness of the price. James Glanville, a UOP director and partner at Lehman, was involved in the process. However, Glanville spent the weekend away and was telephoned by the Lehman team with their assessment that $21 was a fair price. Upon his return, and arrival at the board meeting, Glanville entered a fair price of $21 per share into a previously-prepared fairness opinion letter.

Ultimately, UOP’s board resolved to accept Signal’s offer. The merger was submitted to UOP’s shareholders via a proxy statement and was approved on May 26, 1978 at the annual shareholders meeting. Neither the shareholders nor the entirety of the board were made aware of the Arledge-Chitiea report showing a fair price of up to $24 per share.