Short-Form Mergers in Delaware
Marc I. Steinberg
This article analyzes the ramifications of the Delaware Supreme Court’s decision in Glassman v. Unocal Exploration Corp. that limited a minority shareholder’s remedy in the short-form merger context normally to that of appraisal. This decision stands in marked contrast to the invocation of the entire fairness test that applies in parent-subsidiary long form mergers. Nonetheless, important issues remain outstanding after Glassman, including the continued critical role of adequate disclosure, the determination of fair value, the viability of the “loss state remedy” theory, a parent corporation’s increased use of the tender offer as a means to consummate a short-form merger, and the availability of appropriate relief, including rescissory damages, when fraud is perpetrated in the short-form merger setting. While applauding the Delaware Supreme Court’s decision in facilitating the effectuation of short-form mergers, and hence in providing increased assurance of commercial certainty, Professor Steinberg posits that the Delaware courts’keen scrutiny with respect to the adequacy of disclosure in this context is crucial in order to provide minority shareholders some meaningful degree of protection.