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added that Alcatel is ‘ready to proceed with an unfriendly tender at a lower price’ if the
$15.50 per share price is not recommended to, and approved by, the Company’s Board
of Directors.” In his testimony at trial, Beringer verified, albeit reluctantly, the accuracy
of the foregoing statement in the minutes: "[Alcatel] let us know that they were giving
serious consideration to making an unfriendly tender" (emphasis added).
***
The Power to Say No, the Parties’ Contentions, Arm’s Length Bargaining
The Court of Chancery properly noted that limitations on the alternatives to
Alcatel’s offer did not mean that the Independent Committee should have agreed to a
price that was unfair:
The power to say no is a significant power. It is the duty of directors serving
on [an independent] committee to approve only a transaction that is in the
best interests of the public shareholders, to say no to any transaction that
is not fair to those shareholders and is not the best transaction available.
It is not sufficient for such directors to achieve the best price that a
fiduciary will pay if that price is not a fair price.
(Quoting In re First Boston, Inc. Shareholders Litig., Del. Ch., C.A. 1990 Del. Ch.
LEXIS 74, *20-*21 (Consolidated), Allen, C., 1990 WL 78836, slip op. at 15-16 (June 7,
1990)).
***
Alcatel’s Entire Fairness Burden Did Not Shift to Kahn
A condition precedent to finding that the burden of proving entire fairness has
shifted in an interested merger transaction is a careful judicial analysis of the factual
circumstances of each case. Particular consideration must be given to evidence of
whether the special committee was truly independent, fully informed, and had the
freedom to negotiate at arm’s length. Weinberger v. UOP, Inc., Del. Supr., 457 A.2d 701,
709-10 n.7 (1983). See also American Gen. Corp. v. Texas Air Corp., Del. Ch., 1987 Del Ch.
LEXIS 382, *11, C.A. Nos. 8390, 8406, 8650 & 8805, Hartnett, V.C., 1987 WL 6337, (Feb.
5, 1987), reprinted in 13 Del. J. Corp. L. 173, 181 (1988). "Although perfection is not
possible," unless the controlling or dominating shareholder can demonstrate that it has
not only formed an independent committee but also replicated a process "as though each
of the contending parties had ill fact exerted its bargaining power at arm’s length," the
burden of proving entire fairness will not shift. Weinberger v. UOP, Inc., 457 A.2d 701 at
709-10 n.7. See also Rosenblatt v. Getty Oil Co., Del. Supr., 493 A.2d 929, 937-38 (1985).
172
$15.50 per share price is not recommended to, and approved by, the Company’s Board
of Directors.” In his testimony at trial, Beringer verified, albeit reluctantly, the accuracy
of the foregoing statement in the minutes: "[Alcatel] let us know that they were giving
serious consideration to making an unfriendly tender" (emphasis added).
***
The Power to Say No, the Parties’ Contentions, Arm’s Length Bargaining
The Court of Chancery properly noted that limitations on the alternatives to
Alcatel’s offer did not mean that the Independent Committee should have agreed to a
price that was unfair:
The power to say no is a significant power. It is the duty of directors serving
on [an independent] committee to approve only a transaction that is in the
best interests of the public shareholders, to say no to any transaction that
is not fair to those shareholders and is not the best transaction available.
It is not sufficient for such directors to achieve the best price that a
fiduciary will pay if that price is not a fair price.
(Quoting In re First Boston, Inc. Shareholders Litig., Del. Ch., C.A. 1990 Del. Ch.
LEXIS 74, *20-*21 (Consolidated), Allen, C., 1990 WL 78836, slip op. at 15-16 (June 7,
1990)).
***
Alcatel’s Entire Fairness Burden Did Not Shift to Kahn
A condition precedent to finding that the burden of proving entire fairness has
shifted in an interested merger transaction is a careful judicial analysis of the factual
circumstances of each case. Particular consideration must be given to evidence of
whether the special committee was truly independent, fully informed, and had the
freedom to negotiate at arm’s length. Weinberger v. UOP, Inc., Del. Supr., 457 A.2d 701,
709-10 n.7 (1983). See also American Gen. Corp. v. Texas Air Corp., Del. Ch., 1987 Del Ch.
LEXIS 382, *11, C.A. Nos. 8390, 8406, 8650 & 8805, Hartnett, V.C., 1987 WL 6337, (Feb.
5, 1987), reprinted in 13 Del. J. Corp. L. 173, 181 (1988). "Although perfection is not
possible," unless the controlling or dominating shareholder can demonstrate that it has
not only formed an independent committee but also replicated a process "as though each
of the contending parties had ill fact exerted its bargaining power at arm’s length," the
burden of proving entire fairness will not shift. Weinberger v. UOP, Inc., 457 A.2d 701 at
709-10 n.7. See also Rosenblatt v. Getty Oil Co., Del. Supr., 493 A.2d 929, 937-38 (1985).
172
