Revlon Duties Do Not Prohibit Acceptance of a Compelling, Pre-Emptive Bid

In a much-anticipated decision, the Delaware Supreme Court (the “Court”) recently overturned the controversial ruling of the Delaware Court of Chancery (the “Chancery Court”) in Lyondell Chemical Company v. Ryan, C.A., No. 3176 (Del. Sup. Ct. March 25, 2009). The Chancery Court had twice denied the Lyondell directors' motion for summary judgment in a class action suit brought by Lyondell stockholders who alleged that the directors breached their fiduciary duties by approving the sale of the company to a strategic buyer, despite negotiating a 45% premium to the then-current market price. The Court took issue with the Chancery Court's rulings at nearly every turn, concluding that “the existing record mandates the entry of judgment in favor of the directors.” The Lyondell ruling confirms the authority of disinterested directors to pursue aggressively a transaction that they have determined in good faith to be beneficial to stockholders, even when a full auction process, or even a more limited pre- or post-signing market check, has not occurred due to the demands of a strategic bidder.