Stay up-to-date with the latest developments in securities law through access to both news and all statutes and regulations. Find relevant corporate filings through a searchable EDGAR database. And...
By Yin Wilczek
Entertaining and lifestyle maven Martha Stewart Aug. 18 beat back an investor lawsuit alleging she breached her fiduciary duty in the sale of her namesake company in 2015 to Sequential Brands Group.
The plaintiffs alleged that Stewart leveraged her position as controlling stockholder to secure more consideration for herself than other shareholders.
The Delaware Chancery Court dismissed the claims. The court applied the business judgment rule—a standard deferential to corporate decision-making—because the deal was structured using the measures outlined by the state’s high court in Kahn v. M&F Worldwide Corp. ( MFW) to protect minority shareholders ( In re Martha Stewart Living Omnimedia, Inc. Stockholder Litig. , 2017 BL 289570, Del. Ch., No. 11202-VCS, 8/18/17 ).
This is the first time in which the Delaware courts have considered MFW in the context where the controlling stockholder is a seller only. Prior cases in which the ruling was applied—including those involving take-private transactions for Books-A-Million Inc. and Dole Food Co.—had controlling stockholders with interests on both sides of the deal.
Sequential bought Martha Stewart Living Omnimedia Inc. in December 2015 for $6.15 per share in cash and stock.
In their lawsuit, the shareholder plaintiffs alleged that while Stewart received the same consideration they did for her shares, she diverted more consideration to herself in the form of side deals, such as various intellectual property-related agreements.
In granting Stewart’s motion to dismiss, Vice Chancellor Joseph Slights III concluded that MFW applies to situations where the controlling stockholder is a seller only. He also found that the transaction took the protective steps required in MFW: It was approved by a special independent committee and by a majority of non-affiliated shareholders.
MFW lays out a “roadmap by which a controlling stockholder’s buyout of its subsidiary in a negotiated merger will earn the controller the maximum deference our law allows, even at the pleadings-stage,” the judge wrote. “Because the course of this transaction hit each point on the M&F Worldwide map, Plaintiffs’ only path to challenge the Merger is via a claim of waste, which they have neither pled nor remotely suggested is viable here.”
To contact the reporter on this story: Yin Wilczek in Washington at email@example.com
To contact the editor responsible for this story: Phyllis Diamond at firstname.lastname@example.org
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)