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policy or to the board's control over the corporation. As a result, there was a need for "an enhanced duty" on the board, so as to ensure that their decisions in this area were meant only to further the welfare of the corporation and its shareholders. Therefore, the court ruled that in order for the board to be allotted the protection of the business judgment rule, the board must demonstrate that it was responding to a legitimate threat to corporate policy and effectiveness, and that its actions were "reasonable in relation to the threat posed."
28:
177:. Because most shareholders would prefer to receive the cash instead of the bonds, shareholders were expected to tender their shares into the deal, even if they did not think $ 54 was a fair price. If a shareholder declined to tender, that shareholder risked being cashed-out for $ 54 in risky debt instruments instead of cash.
242:
The significance of the opinion flows from the court's premise that, due to the inherent conflict of interest involved, takeover defenses pose a significant danger to shareholders. In essence, the Unocal court feared that a board may use takeover defenses to impermissibly prevent threats to corporate
200:
It found that the Unocal's board of directors had reasonable grounds for believing that a danger to corporate policy or effectiveness existed and that the response was reasonable in relation to the threat posed. This reasonable relation analysis permitted an analysis of the price, nature, and timing
180:
In response to the Mesa tender offer, Unocal made a self-tender at $ 72 for all but the Mesa shares. The Unocal board attempted to launch a self-tender offer to combat an unsolicited tender offer by Mesa
Petroleum (Mesa). The self-tender offer would be triggered upon Mesa acquiring sixty-four million
330:
See Ross W. Wooten, Comment, Restructurings During a
Hostile Takeover: Directors' Discretion or Shareholders' Choice?, 35 Hous. L. Rev. 505, 508-10 (1998) (discussing how Delaware courts have changed the manner by which they review hostile takeover defenses, and indicating that after the Unocal
340:
See Unocal Corp. v. Mesa
Petroleum Co., 493 A.2d 946, 950 (Del. 1985) (explaining what occurred when Unocal's board met to consider the Mesa tender offer and discussing the impact of presentations at this meeting which focused on the inadequacies of the Mesa
136:, the Court held that a board of directors may only try to prevent a take-over where it can be shown that there was a threat to corporate policy and the defensive measure adopted was proportional and reasonable given the nature of the threat.
368:
See id. at 954-55 (explaining the need for judicial examination of an enhanced duty before a board may enjoy the protections of the business judgment rule "because of the omnipresent specter that a board may be acting primarily in its own
378:
See id. at 955 (""We must bear in mind the inherent danger in the purchase of shares with corporate funds to remove a threat to corporate policy when a threat to control is involved.'" (quoting
Bennett v. Propp, 187 A.2d 405, 409 (Del.
49:
Unocal
Corporation, a Delaware corporation v. Mesa Petroleum Co., a Delaware corporation, Mesa Asset Co., a Delaware corporation, Mesa Eastern, Inc., a Delaware corporation, and Mesa Partners II, a Texas partnership
201:
of the offer as well as the impact on shareholders, creditors, customers, employees, and the community. Note that this permission to consider other constituencies besides the shareholders was curtailed in
293:
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shares of Unocal, and would mean that Unocal itself would buy-back 49% of the outstanding shares of Unocal - but none of the shares to be bought-back could be shares held by Mesa.
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The trial court found that this selective exchange offer was not legally permissible, and issued a preliminary injunction against the use of the self-tender offer defense.
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See id. at 951 (discussing the terms of the Unocal board resolution and indicating it would be subject to any additional conditions Unocal's officers believed necessary).
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test the court established in this case to determine whether directors may try to prevent a take-over is a two pronged test. The two prongs include:
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See id. at 958-59 (holding the directors' decision to oppose the Mesa tender offer had been made in good faith and upon reasonable investigation).
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234:, or payment to the raider to go away, in Unocal the court sanctioned reverse greenmail, or payment to shareholders excluding the raider.
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409:"Judgments - Criterion Properties plc (Appellants) v. Stratford UK Properties LLC (Respondents) and others"
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Second, was the directors' defensive measure reasonable in relation to the threat posed?
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decision, the protection of shareholders is favored over total director discretion).
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in which the front end was $ 54 in cash, and the back end of the deal was $ 54 in
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LORD RODGER OF EARLSFERRY; LORD WALKER OF GESTINGTHORPE & LORD CARSWELL.
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Mesa
Petroleum had made a front-end loaded two-tiered hostile
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First, did the directors reasonably perceive a threat? And,
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on corporate defensive tactics against take-over bids.
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Criterion
Properties plc v Stratford UK Properties LLC
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Revlon, Inc. v. MacAndrews & Forbes
Holdings, Inc.
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decision in 1985, the
Delaware courts had applied the
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The
Delaware Supreme Court reversed the trial court.
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146:for board of directors (as later modified in
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411:. United Kingdom House of Lords Decisions
139:This requirement has become known as the
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149:Unitrin, Inc. v. American General Corp.
267:Moran v. Household International, Inc.
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21:Unocal Corp. v. Mesa Petroleum Co.
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317:Unocal Corp. v. Mesa Petroleum Co
436:United States corporate case law
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446:Union Oil Company of California
61:June 10, 1985 (written opinion)
451:1985 in United States case law
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314:Court, the Delaware Supreme.
92:, Justices, and Taylor, Judge
59:May 17, 1985 (oral decision)
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39:Supreme Court of Delaware
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441:Delaware state case law
127:business judgment rule
116:Delaware Supreme Court
103:v. Mesa Petroleum Co.
86:John J. McNeilly, Jr.
204:Revlon v. MacAndrews
90:Andrew G.T. Moore II
253:Unocal Corporation
224:Note that whereas
171:Unocal Corporation
286:Paramount v. Time
185:Court of chancery
112:landmark decision
110:(Del. 1985) is a
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397:Id. at 955.
388:Id. at 954.
72:(Del. 1985)
430:Categories
341:proposal).
211:The Unocal
175:junk bonds
156:Background
121:Until the
232:greenmail
379:1962))).
278:(1986);
247:See also
238:Analysis
193:Judgment
66:Citation
114:of the
56:Decided
297:(2004)
289:(1989)
270:(1985)
262:(1964)
142:Unocal
134:Unocal
123:Unocal
101:Unocal
302:Notes
161:Facts
35:Court
417:2015
169:for
144:test
167:bid
132:In
432::
207:.
106:,
88:,
419:.
320:.
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