Hollinger Inc. v. Hollinger Int'l, Inc.

858 A.2d 342 (Del. Ch. 2004)



With respect to Del. Code Ann. tit. 8, § 271, there are two key words: "substantially" and "all." Neither word is particularly difficult to understand. The easier one is "all." "All" means "all," or if that is not clear, all, when used before a plural noun such as "assets," means the entire or unabated amount or quantity of the whole extent, substance, or compass of; the whole. "Substantially" is the adverb form of "substantial." Among other things, substantial means being largely but not wholly that which is specified. Substantially conveys the same meaning as "considerably" and "essentially" because it means to a great extent or degree and communicates that it is very nearly the same thing as the noun it acts upon. In all their relevant meanings, substantial and substantially convey the idea of amplitude, of something that is considerable in importance, value, degree, amount, or extent. A fair and succinct equivalent to the term "substantially all" would therefore be essentially everything.


Hollinger Inc. (or "Inc.") sought a preliminary injunction preventing Hollinger International, Inc. (or "International") from selling the Telegraph Group Ltd. (England) to Press Holdings International, an entity controlled by Frederick and David Barclay (hereinafter, the "Barclays"). The Telegraph Group was an indirect, wholly owned subsidiary of International and publishes the Telegraph newspaper and the Spectator magazine. Inc. argued that a preliminary injunction should issue because it was clear that the sale of the Telegraph satisfied the quantitative and qualitative test used to determine whether an asset sale involved substantially all of a corporation's assets. The Telegraph Group was one of the most profitable parts of International and was its most prestigious asset. After its sale, International would be transformed from a respected international publishing company controlling one of the world's major newspapers to a primarily American publishing company whose most valuable remaining asset, the Chicago Sun-Times, was the second leading newspaper in the Second City. As a secondary argument, Inc. argued that a preliminary injunction ought to issue against the Telegraph sale even if § 271 did not require a vote. Because Inc.-affiliated directors had been excluded from the International board committee that approved the Telegraph sale, Inc. claimed that its rights as a controlling stockholder were inequitably denuded. Inc. argued that an equitable right to vote existed here because the International board majority was rushing to sell the Telegraph Group during an unusual period in which Inc. was inhibited from wielding the full power that usually came with controlling 68% of the vote.


Were the corporation's shareholders required under § 271 to vote to approve (or disapprove) of the sale of "all or substantially all" of the corporation's property and assets?




Without conclusively having to decide, the court assumed that § 271 applied to sales of assets owned directly and indirectly by its subsidiaries. Under two-pronged Gimbel test, § 271 permitted the corporation's board to decide to sell one business without shareholder approval when other substantial businesses were retained. If quantitatively—as opposed to qualitatively—vital portions of the unsold businesses constituted substantial, viable, ongoing components of the corporation, then the sale was not subject to § 271. "Substantially all" did not simply mean more than 50 percent. Quantitatively measured, the unsold "Chicago Group" publications remained a viable ongoing component that produced about 50 percent of the corporation's value and earnings; so, a § 271 vote was not required. After CS's controlling shareholder's fiduciary breaches, and based on lawsuits reducing its control abilities, CS did not still retain some equitable right to veto the sale. The court decided that the evidence did not indicate that the board breached its duty of care by deciding to sell publications without exploring other strategic opportunities, other complete or partial sales, or no sales, and none of the shareholders had a statutory right to vote upon, nor did the CS have an equitable right to veto, the proposed sale of the publications to the buyer. Thus, the court denied the preliminary injunction.

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