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