Opinion ID: 1934995
Heading Depth: 1
Heading Rank: 33

Heading: Tender Offer/Proxy Contest

Text: We begin our examination of Unitrin's Repurchase Program mindful of the special import of protecting the shareholder's franchise within Unocal's requirement that a defensive response be reasonable and proportionate. Stroud v. Grace, 606 A.2d at 92. For many years the favored attack of a [corporate] raider was stock acquisition followed by a proxy contest. Unocal, 493 A.2d at 957. Some commentators have noted that the recent trend toward tender offers as the preferable alternative to proxy contests appears to be reversing because of the proliferation of sophisticated takeover defenses. Lucian A. Bebchuk & Marcel Kahan, A Framework for Analyzing Legal Policy Towards Proxy Contests, 78 Cal.L.Rev. 1071, 1134 (1990). In fact, the same commentators have characterized a return to proxy contests as the only alternative to hostile takeovers to gain control against the will of the incumbent directors. Id. [24] The Court of Chancery, in the case sub judice, was obviously cognizant that the emergence of the poison pill as an effective takeover device has resulted in such a remarkable transformation in the market for corporate control that hostile bidders who proceed when such defenses are in place will usually have to couple proxy contests with tender offers. Joseph A. Grundfest, Just Vote No: A Minimalist Strategy for Dealing with Barbarians Inside the Gates, 45 Stan. L.Rev. 857, 858 (1993). [25] The Court of Chancery concluded that Unitrin's adoption of a poison pill was a proportionate response to the threat its Board reasonably perceived from American General's Offer. Nonetheless, the Court of Chancery enjoined the additional defense of the Repurchase Program as disproportionate and unnecessary. The record reflects that the Court of Chancery's decision to enjoin the Repurchase Program is attributable to a continuing misunderstanding, i.e., that in conjunction with the longstanding Supermajority Vote provision in the Unitrin charter, the Repurchase Program would operate to provide the director shareholders with a veto to preclude a successful proxy contest by American General. [26] The origins of that misunderstanding are three premises that are each without record support. Two of those premises are objective misconceptions and the other is subjective.