When a Delaware corporation engages in a sale of control transaction, its board’s obligation is to obtain the highest value reasonably attainable. This obligation, often referred to as Revlon duties, may be fulfilled as long as the board acts reasonably even if its process is not perfect. A Delaware court reviewing a challenge to a board’s exercise of Revlon duties does so with enhanced scrutiny to determine whether the board acted reasonably to maximize shareholder value. No single blueprint exists that a board must follow.
The recent Delaware Supreme Court decision in C&J Energy Services v. City of Miami General Employees’ and Sanitation Employees’ Retirement Trust, No. 655/657, 2014 (Del. Supr., Dec. 19, 2014), applies these principles in holding that a board is not required to run an auction to satisfy its duties as long as interested bidders “have a fair opportunity to present a higher-value alternative, and the board has the flexibility to eschew the original transaction and accept the higher-value deal.” The case provides guidance to practitioners concerning not only the interplay of Revlon and preliminary injunction standards but also the limits to remedies against buyers who do not aid and abet a board’s breach of fiduciary duties.
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