Opinion ID: 1984316
Heading Depth: 2
Heading Rank: 2

Heading: The Duty to Seek the Highest Value Reasonably Available

Text: Plaintiffs appear to rest their claim of a duty to seek the best value reasonably available on allegations that the Board initiated an active bidding process. Plaintiffs do not consider, however, that this method of invoking the duty requires that the Board also seek to sell control of the company or take other actions which would result in a break-up of the company. While the Board properly encouraged Union Pacific to improve its offer and may have used the results as leverage against Burlington, the Plaintiffs do not allege that the Board at any point decided to pursue a transaction which would result in a sale of control of Santa Fe to Burlington. Rather, the complaint portrays the Board as firmly committed to a stock-for-stock merger with Burlington. Conspicuously absent from the complaint is a description of the stock ownership structure of Burlington. Absent this factual averment, plaintiffs have failed to allege that control of Burlington and Santa Fe after the merger would not remain in a large, fluid, changeable and changing market. Arnold v. Soc'y for Sav. Bancorp., Inc., Del.Supr., 650 A.2d 1270, 1290 (1994) (quoting Paramount Communications, Inc. v. QVC Network, Inc., Del.Supr., 637 A.2d 34, 47 (1993)). Plaintiffs have failed to state a claim that the Board had a duty to seek the transaction offering the best value reasonably available to the stockholders. Paramount v. QVC, 637 A.2d at 43. This duty arises: (1) when a corporation initiates an active bidding process seeking to sell itself or to effect a business reorganization involving a clear break-up of the company, Paramount Communications, Inc. v. Time Inc., Del.Supr., 571 A.2d 1140, 1150 (1990) [ Time-Warner ]; (2) where, in response to a bidder's offer, a target abandons its long-term strategy and seeks an alternative transaction involving the break-up of the company, id. ; or (3) when approval of a transaction results in a sale or change of control, QVC, 637 A.2d at 42-43, 47. In the latter situation, there is no sale or change in control when `[c]ontrol of both [companies] remain[s] in a large, fluid, changeable and changing market.' Id. at 47 (citation and emphasis omitted). Arnold, 650 A.2d at 1290 (footnote omitted).