In Kahn v. M&F Worldwide Corp, the Delaware Supreme Court unanimously affirmed the Court of Chancery’s 2013 decision that a going-private merger with a controlling stockholder may be subject to the deferential business judgment rule, rather than an entire fairness standard of review. The Delaware Supreme Court held that business judgment review is applicable if the merger was conditioned prior to commencement of negotiations on both (1) approval by a committee of independent directors meeting certain requirements and (2) a non-waivable, informed, uncoerced majority-of-the-minority vote because “the simultaneous deployment” of these procedural protections results in the transaction “acquir[ing] the shareholder-protective characteristics of third-party, arm’s-length mergers, which are reviewed under the business judgment standard.”
Although the opinion affirms the Court of Chancery’s decision in In re MFW Shareholders Litigation, the Delaware Supreme Court’s discussion of a special committee’s “duty of care in negotiating a fair price” and related commentary in the decision could be read to add a new factor to the test the Court of Chancery announced that may narrow the factual circumstances in which deal litigation arising under this framework may terminate at an early stage.
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