671 A.2d 1368 (Del. 1996)
Toward the end of 1985, Meyer determined that it would be in Milacron's best interests to develop a recapitalization plan.1 On December 10, 1985, Meyer, along with Geier and several Milacron officers, met with First Boston and Milacron's outside legal counsel, Cravath, Swaine & Moore.2
A follow-up meeting occurred on January 8, 1986, at which First Boston identified Milacron's objectives as maintaining long-term value, meeting financing needs without impairing long-term focus, protecting against raiders, and enabling diversification.3 First Boston recommended a tenure voting plan under which existing common stockholders would receive ten votes per share, with voting rights reverting to one vote upon transfer and regaining super-voting status after thirty-six months of ownership.4
On January 24, 1986, Milacron management and First Boston presented the Recapitalization to the Board at a special board meeting.5 The Board postponed action and, on March 21, 1986, adopted a resolution proposing the Amendment and Recapitalization, determining that the Amendment and Recapitalization are in the best interests of the Company and its shareholders and recommending a favorable vote by stockholders at the April 22, 1986 Annual Meeting.6
Milacron sent stockholders a Proxy Statement for the April 22, 1986 annual meeting that explained the plan's benefits and disadvantages, including concentration of voting power in the Geier Family Group, which owned or controlled in excess of 50 percent of the total voting power, and the risk of NYSE delisting if the Amendment failed to receive a two-thirds vote.7 Over 72 percent of the outstanding common stock voted in favor of the Amendment. Assuming all the common stock held by the Family Group voted in favor, of the remaining presumed unaffiliated shares present or represented by proxy, approximately 5,858,777 voted in favor and 3,103,608 voted against or abstained.8
Josephine L. Williams, a minority stockholder, filed suit in the Court of Chancery in April 1986 against Milacron and nine directors, alleging entrenchment and other claims.9 After partial dismissal of the complaint and discovery, the Court of Chancery granted summary judgment to defendants on September 9, 1994.10 Williams appealed to the Supreme Court of Delaware.11
Whether the Recapitalization implicated the Unocal or Blasius standards of review?12
Unocal applies only when a board unilaterally adopts defensive measures in reaction to a perceived threat to corporate policy and effectiveness.13 Blasius applies only when the primary purpose of board action is to interfere with or impede the exercise of the shareholder franchise and stockholders are not given a full and fair opportunity to vote.14
No. The established facts demonstrate that the Board recommended the Amendment to stockholders pursuant to 8 Del.C. § 242 and that stockholders approved it at the April 22, 1986 annual meeting.15 There was no unilateral board action in the face of a threat, and the record contains no evidence that the primary purpose was to impede the stockholder vote.16 The Proxy Statement explained the plan's benefits and disadvantages, and the Family Group's control made approval virtually assured, yet the vote proceeded on a fully informed basis.17
The Recapitalization did not implicate the Unocal or Blasius standards of review.18
Whether the business judgment rule protected the Board's recommendation of the charter amendment to stockholders?19
The business judgment rule protects the action of an independent and disinterested board in recommending a charter amendment to stockholders under 8 Del.C. § 242 unless the presumption is rebutted by evidence of breach of fiduciary duty, interestedness, or lack of due care.20
Yes. The established facts show that seven of the ten directors were independent and disinterested, collectively owning less than one percent of the shares, and that the Board acted after receiving presentations from First Boston and legal counsel.21 No evidence rebuts the presumption that the Board acted independently, with due care, in good faith, and in the honest belief that the Recapitalization was in the stockholders' best interests.22 The recommendation therefore receives the protection of the business judgment rule.2324
The business judgment rule protected the Board's recommendation of the charter amendment to stockholders.25
Whether the stockholder vote approving the amendment was valid and dispositive despite participation by the controlling Family Group?26
A fully informed stockholder vote approving a charter amendment under 8 Del.C. § 242 is valid and dispositive even when a controlling bloc participates, provided there is no fraud, waste, manipulative conduct, or other inequitable conduct and the statutory procedure is followed.27
Yes. Over seventy-two percent of the outstanding common stock voted in favor of the Amendment after receiving a Proxy Statement that disclosed all material benefits and disadvantages of the Recapitalization.28 Although the Family Group voted its shares in favor, the vote satisfied the statutory requirements of 8 Del.C. § 242(b)(1) and was not shown to involve any fraud, waste, or inequitable conduct.29 The vote therefore validly effected the Recapitalization under the organic statutory scheme.
The stockholder vote approving the amendment was valid and dispositive despite participation by the controlling Family Group.30
Whether the proxy disclosures were impermissibly coercive?31
No. The established facts show that the Proxy Statement neutrally disclosed the Family Group's voting control, the virtual assurance of approval, and the risk of NYSE delisting if the Amendment failed to receive a two-thirds vote.34 These statements were required for full disclosure, were not threatening, and allowed stockholders to evaluate the Recapitalization on its merits.35 No improper coercion occurred.36
The proxy disclosures were not impermissibly coercive.37
Whether a majority of the minority vote was required for the amendment to be valid?38
Delaware law does not require a majority of the minority vote for a charter amendment under 8 Del.C. § 242 when the board is independent, there is no interested director transaction, and entire fairness review is not triggered.39
No. The established facts show that the Board was independent and that the transaction was not an interested director transaction requiring entire fairness review.40 The statutory scheme of 8 Del.C. § 242 requires only board recommendation and approval by a majority of the outstanding shares entitled to vote.41 The absence of a majority of the minority vote therefore has no adverse effect on validity.42
A majority of the minority vote was not required for the amendment to be valid.43