Delaware Chancellor Bouchard has issued an opinion in the Family Dollar Stores shareholder litigation, in which he concludes that the Revlon standard was triggered by a "sale of control." The opinion is devoid of analysis of why the transaction in question constitutes a sale of control but I assume Bouchard was relying on the fact that "75% of the consideration [was] to be paid in cash and 25% to be paid in [acquiror] Tree common stock."
Sigh. This opinion thus perpetuates what I believe to be a serious error--both as a matter of doctrine and sound policy--by the Delaware Chancery Court; namely, the application of Revlon simply because a certain percentage of the deal is in the form of cash.
In my article, The Geography of Revlon-Land (July 23, 2012), available at SSRN: http://ssrn.com/abstract=2115769, I argued that:
A number of Chancery decisions have drifted away from the doctrinal parameters laid down by the Supreme Court. In this article, I argue that they have done so because the Chancellors have misidentified the policy basis on which Revlon rests. Accordingly, I argue that Chancery should adopt a conflict of interest-based approach to invoking Revlon, which focuses on where control of the resulting corporate entity rests when the transaction is complete.
The focus on the form of consideration is inconsistent with binding Supreme Court precedent and bad public policy. Sadly, that focus now seems to be entrenched on the Delaware Chancery Court. I retain some hope, however, that the Delaware Supreme Court will eventually overturn these cases and restore the Revlon analysis to its correct context.
