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It is now well established law that the principles of Unocal require that directors' actions "be scrutinized collectively as a unitary response to the perceived threats" posed by the offeror.
In December 1982, an offeror made a tender offer for 51.8 percent of the common stock of the target. Eventually, the offer was terminated and there was a substitution of a new tender offer in January 1983. The shareholders contended that the target destroyed their inchoate pro-ration rights as a result of the settlement agreement terminating the December offer.
Did the target destroy the stockholders’ inchoate proration rights as a result of the settlement agreement terminating the December offer?
In affirming, the court held that the target did not improperly or impermissibly terminate the December offer. The court concluded that the directors acted in good faith and on an informed basis and that their actions were a reasonable response to the threat posed by the unsolicited and highly conditional December offer. The court further found that there was nothing to support the shareholder's claim that the directors arranged the termination of the December offer solely for the purpose of enabling the subsequent tender of their shares.