Delaware court upholds Perelman-M&F ruling, may alter buyouts

Fri Mar 14, 2014 3:05pm EDT
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By Tom Hals

(Reuters) - Ronald Perelman's buyout of a company he controlled was not subject to heightened court review because the billionaire acted as if he were an outside buyer, according to a Delaware Supreme Court ruling that could affect future insider deals.

Friday's opinion could prod Wall Street dealmakers to follow Perelman's process for buying out the minority shareholders of M&F Worldwide Corp, a company in which his holding company owned 43 percent of the stock.

"MFW will incentivize those who structure such transactions to make sure they are done properly and replicate third-party deals. And that's a good thing for stockholders," said Tariq Mundiya who argued the case for the M&F's special committee.

The Supreme Court of Delaware, whose law governs most U.S. companies, said in a 39-page opinion by Justice Randy Holland that the M&F deal process created "a countervailing, offsetting influence" against Perelman. As a result, the deal would not be subject to a thorough court review.

Perelman premised his 2011 proposal to acquire all of M&F's outstanding stock on approval by a special committee of independent M&F directors and a majority vote by its minority shareholders.

Perelman initially offered $24 per share, although the committee eventually agreed to $25, a premium of nearly 50 percent to the pre-offer stock price. The deal was approved by 65 percent of M&F's minority shareholders.

Mergers are reviewed by courts if a shareholder sues, which happens on almost every deal. The M&F buyout was a particularly attractive target for shareholder attorneys.

That's because Delaware law would normally put the burden on M&F's board to prove the buyout process and price were both fair, a demanding test known as entire fairness.   Continued...

Ronald Perelman speaks after he received his award during the Elton John AIDS Foundation's 12th Annual "An Enduring Vision" benefit gala at Cipriani in New York, October 15, 2013. REUTERS/Eduardo Munoz