MFW Defense Available despite Control Stockholder's Refusal to Negotiate with Credible Competing Bidder

Document Type

Article

Publication Title

Vanderbilt Law Review En Banc

Publication Date

Fall 2024

Page Number

39

Keywords

stockholder litigation, fairness, Delaware corporate law

Disciplines

Commercial Law | Law

Abstract

In Smart Local Unions and Councils Pension Fund v. BridgeBio Pharma, Inc., C.A. No. 2021-1030-PAF (Del. Ch. December 29, 2022) ("BridgeBio Pharma"), the Delaware Court of Chancery ("Chancery Court") examined the negotiation and approval process underlying a control stockholder's buyout of minority shares via a freeze-out merger. As usually is the case in control stockholder-related litigation in Delaware, the key gating issue for Vice Chancellor Paul A. Fioravanti, Jr. was selection of the appropriate standard of judicial review.

I. LEGAL BACKGROUND

Traditionally, the Chancery Court reviewed challenges to control stockholder-related transactions under the entire fairness standard-the most exacting standard of review. In this context, the control stockholder bears the heavy burden of establishing the transaction's entire fairness. See Robert S. Reder, MFW Framework Requires Majority-of-Minority Stockholder Approval Even When Controller Structures Transaction to Avoid Statutory Stockholder Vote, 75 Vand. L. Rev. En Banc 157 (2022).

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