Absent fraud or illegality, appraisal is the exclusive remedy available to a minority stockholder who objects to a short-form merger. The determination of fair value must be based on all relevant factors, including damages and elements of future value, where appropriate.
A board of directors of a corporation which owned approximately 96 percent of the stock of another corporation and the subsidiary corporation's board of directors established committees to study a possible merger. The subsidiary corporation's committee consisted of three directors who, although also directors of the parent corporation, were not officers or employees of the parent company. The subsidiary corporation also retained financial and legal advisors to assist it during the review process and, after several meetings, its directors agreed to the merger at an exchange ratio of .54 shares of the parent corporation's stock for each share of the subsidiary corporation's stock. Glassman, a subsidiary corporation's minority shareholders, filed a class action against Unocal Expl. Corp., the parent corporation and its directors, alleging that the directors breached their fiduciary duties of entire fairness and full disclosure. The Court of Chancery, New Castle County (Delaware), held that the minority shareholders' exclusive remedy was appraisal and the shareholders appealed.
Did the Court of Chancery err in its judgment that minority shareholders' exclusive remedy was appraisal?
The State Supreme Court held that, in a short-form merger conducted pursuant to Del. Code Ann. tit. 8, § 253, the parent corporation did not have to establish entire fairness, and, absent fraud or illegality, appraisal was the only recourse for minority stockholders who were dissatisfied with the merger consideration.