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To arrive at a judgment of the fairness of the merger, all of its terms must be considered.
Mayflower Hotel Corporation (herein "Mayflower") planned to merge with its parent corporation, Hilton Hotels Corporation (herein "Hilton"). Plaintiffs, minority stockholders in Mayflower, sought injunctive relief trying to stop the merger. Plaintiffs alleged that the terms of the merger were grossly unfair and fraudulent and that a quorum of directors from Mayflower was not present to vote on the merger. The lower court denied injunctive relief, and plaintiffs appealed.
Are the terms of a proposed merger of Mayflower into its parent corporation, Hilton, fair to the minority stockholders of Mayflower?
The court and the parties agreed that defendants bore the burden of establishing that the merger was fair and the court had to scrutinize the transaction carefully. The court noted that plaintiffs presented no cases that supported their theory that when a subsidiary merged into the parent corporation, minority stockholders were entitled to the liquidating value of their stock. The court held that the evidence relied upon by defendants to determine comparative net asset value was sufficient to discharge duty they were under despite inconclusive nature of "indicated values" arrived at by defendants' consultant. Mayflower’s bylaws allowed for a quorum to include interested directors and the bylaws did not violate statute.