Thank You For Submiting Feedback!
A board's unilateral decision to adopt a defensive measure touching upon issues of control that purposefully disenfranchises its shareholders is strongly suspect under the Unocal test, and cannot be sustained without a compelling justification.
Hilton Hotels Corporation and HLT Corporation (collectively "Hilton") made a hostile takeover attempt of ITT Corporation ("ITT"). ITT sold several assets, refused to conduct its annual meeting, and adopted a "Comprehensive Plan" whereby it would split itself into three new entities. ITT sought to implement the Comprehensive Plan, which also contained a poison pill, prior to the annual meeting and without shareholder approval. Hilton sought an injunction and declaratory relief regarding the powers of ITT’s board of directors; Hilton also sought declaratory relief.
Is a permanent injunction preventing ITT from implementing its Comprehensive Plan proper?
The court granted Hilton’s motion for a permanent injunction preventing ITT from implementing its Comprehensive Plan and ordered ITT to hold its annual meeting. The Comprehensive Plan was preclusive, and the court found little doubt but that its primary purpose was to disenfranchise ITT’s shareholders.