Location Delaware, United States | Ruling court Delaware Supreme Court | |
Citation(s) (CCH) 94, 514; affd 571 A.2d 1140 (Del. 1989) People also search for Unocal Corp. v. Mesa Petroleum Co. |
Paramount Communications, Inc. v. Time Incorporated Fed Sec L Rep (CCH) 94, 514; affd 571 A.2d 1140 (Del. 1989) is a US corporate law case, concerning defenses against mergers and acquisitions in Delaware.
Contents
Facts
Time Inc. and Warner Communications were planning to merge. Time wanted to get into TV more with its HBO channel, and wanted Warner Communications’s help. Then Paramount made an offer to all the shareholders of $200 per share (up from an initial $175). Time shares had been trading at $120. Time had a range of defenses, including a staggered board, making it hard to meet, with a 50-day notice period for any motions, and a poison pill plan with a 15% trigger. But with the Paramount threat, they went further. It was going to be a stock for stock merger, and instead they changed it into a leveraged purchase transaction. The NYSE required that shareholder approval be given for transfers above 20% of shares. So this change in the structure of the transaction meant that shareholders would not be given a say.
Shareholders wanted to enjoin the board from following the merger through, and thwarting Paramount’s offer with its cash out option.
Judgment
Chancellor Allen held that the takeover defenses were proportionate to the threat posed to the culture of the company. It followed that the board had not breached its duties.