Opinion ID: 2165124
Heading Depth: 2
Heading Rank: 4

Heading: The Board's Disavowal of the Reliability of the Management Projections

Text: Plaintiff argues that the proxy statement misled stockholders by disclosing that the board did not rely on Goldman's earnings projections, prepared in connection with the May Proposal, when in fact the board relied on such projections in evaluating the fairness of the Merger. In support, Plaintiff relies on a memorandum dated May 26, 1992, from Connell to the board (the Connell memo) regarding Project Elite (the May Proposal). The Court of Chancery rejected plaintiff's claim as factually unsupported. Plaintiff's claim is without merit. In relevant part, the proxy statement reads: (With respect to Bancorp's prospects, the Board of Directors took into account, among other things, management's base case projections (prepared in April, 1992 in conjunction with Bancorp's capital plan for regulatory purposes) (the base case) and certain alternative projections prepared by management under more favorable assumptions (the best case). The projected 1994 earnings per share (EPS) under the base case and best case were $1.79 and $2.75, respectively, which reflected numerous assumptions [listing assumptions]. It should be noted that many of the assumptions, including those referenced above, were outside the control of Bancorp, and neither Bancorp nor any other person or entity makes any representation as to their achievability [ sic ]; such projections have not been updated and Bancorp does not assume hereby any obligation to update them. Accordingly, neither Bancorp nor any other person or entity believes that Bancorp stockholders should rely on such projections.) (Emphasis added). The crux of plaintiff's argument is that the board (or at least management) relied on the best case projections in evaluating the fairness of the Merger. The Connell memo, however, does not rely on the best case scenario. Rather, it concludes that, because the risks associated with achieving the best case scenario outweigh the potential benefits, the board should reject the best case projection and instead pursue the May Proposal. [28] Nothing in the challenged, above-highlighted portion of the proxy statement was inaccurate or misleading. [29]