Page 208 - מיזוגים ורכישות - פרופ' אהוד קמר 2022
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Background
This case arose from the common fact pattern of an acquirer proposing to
purchase a company that has a controlling stockholder.2 What was somewhat unusual
here was that the controlling stockholder received significant consideration different
from that received by the minority stockholders. Here, the controlling stockholder was
John Q. Hammons, who held approximately 76 percent of the voting power in JQH. The
acquirer was Jonathan Eilian, a third-party real estate investor with whom, as emphasized
by the court, Hammons had no prior relationship and whose offer was neither solicited
by Hammons or JQH. Eilian approached JQH about a possible transaction in late 2004,
when Hammons and a special committee of the JQH board were in the midst of
negotiating a sale of the company to another third-party buyer, Barceló Crestline Corp.
(Barceló). Over the next several months, Hammons and the special committee negotiated
separately with each of Barceló and Eilian. Recognizing the need to obtain Hammons’
consent to any merger, both investors agreed to provide consideration for Hammons’
controlling interest that met his unique requirements, including ownership in the
surviving entity for tax purposes and financial resources to continue to develop and
manage hotels. The special committee, for its part, recognized its inability to broadly
market JQH given Hammons’ transactional veto power, and focused on obtaining the best
price reasonably available to minority stockholders in any deal endorsed by Hammons.
Ultimately, the special committee rejected Barceló’s offer of $13 per share for the
minority shares, but accepted Eilian’s subsequent, superior offer of $24 per share. Under
Eilian’s offer, Hammons received a 2 percent ownership interest in the cash-flow
distributions and preferred equity of the surviving entity; a liquidation preference of $335
million associated with his preferred equity interest in the surviving entity; a $25 million
short-term and $275 million long-term line of credit for hotel development; ownership of
one of JQH’s hotel properties; and various other contractual rights regarding the future
development and management of hotels. In essence, Hammons converted his interest in
JQH into an opportunity to benefit from any upside achieved by Eilian and to continue in
the hotel business himself, without public investors, using assets and contractual rights
that had belonged to JQH or had been exchanged for the assets of JQH. The minority
stockholders of JQH, on the other hand, simply were cashed out. In June 2005, the parties
entered into a merger agreement that conditioned closing of the merger on approval by
2 These include situations in which stockholders do not have majority voting control but still hold
significant equity stakes in the target company in question. See In re Cysive, Inc. Shareholders Litigation,
836 A.2d 531 (Del. Ch. 2003).
204
This case arose from the common fact pattern of an acquirer proposing to
purchase a company that has a controlling stockholder.2 What was somewhat unusual
here was that the controlling stockholder received significant consideration different
from that received by the minority stockholders. Here, the controlling stockholder was
John Q. Hammons, who held approximately 76 percent of the voting power in JQH. The
acquirer was Jonathan Eilian, a third-party real estate investor with whom, as emphasized
by the court, Hammons had no prior relationship and whose offer was neither solicited
by Hammons or JQH. Eilian approached JQH about a possible transaction in late 2004,
when Hammons and a special committee of the JQH board were in the midst of
negotiating a sale of the company to another third-party buyer, Barceló Crestline Corp.
(Barceló). Over the next several months, Hammons and the special committee negotiated
separately with each of Barceló and Eilian. Recognizing the need to obtain Hammons’
consent to any merger, both investors agreed to provide consideration for Hammons’
controlling interest that met his unique requirements, including ownership in the
surviving entity for tax purposes and financial resources to continue to develop and
manage hotels. The special committee, for its part, recognized its inability to broadly
market JQH given Hammons’ transactional veto power, and focused on obtaining the best
price reasonably available to minority stockholders in any deal endorsed by Hammons.
Ultimately, the special committee rejected Barceló’s offer of $13 per share for the
minority shares, but accepted Eilian’s subsequent, superior offer of $24 per share. Under
Eilian’s offer, Hammons received a 2 percent ownership interest in the cash-flow
distributions and preferred equity of the surviving entity; a liquidation preference of $335
million associated with his preferred equity interest in the surviving entity; a $25 million
short-term and $275 million long-term line of credit for hotel development; ownership of
one of JQH’s hotel properties; and various other contractual rights regarding the future
development and management of hotels. In essence, Hammons converted his interest in
JQH into an opportunity to benefit from any upside achieved by Eilian and to continue in
the hotel business himself, without public investors, using assets and contractual rights
that had belonged to JQH or had been exchanged for the assets of JQH. The minority
stockholders of JQH, on the other hand, simply were cashed out. In June 2005, the parties
entered into a merger agreement that conditioned closing of the merger on approval by
2 These include situations in which stockholders do not have majority voting control but still hold
significant equity stakes in the target company in question. See In re Cysive, Inc. Shareholders Litigation,
836 A.2d 531 (Del. Ch. 2003).
204
