Tender Offers and Short-Form Mergers by Controlling Shareholders Under Delaware Law: The '800-Pound Gorilla' Continues Unimpeded - In re Pure Resources, Inc., Shareholders Litigation

This comment analyzes the Delaware Court of Chancery's decision in In re Pure Resources, Inc., Shareholders Litigation. Specifically, the author examines whether the court's application of the Solomon standard of review, rather than entire fairness, to tender offers by controlling shareholders, along with its enhancements of the standard, adequately protect the minority shareholders. The author reviews both the Solomon standard of review and entire fairness, as well as the mechanics of tender offers, short-form mergers, and negotiated mergers. The author concludes that the court's decision effectively put an end to the idea that tender offers by controlling shareholders are examined under the entire fairness standard. Additionally, despite the court's enhancements of the Solomon standard, practically, the minority shareholders will receive no more protection. As a result, the court secured the position of the tender offer followed by a short-form merger as the most favorable transaction for controlling shareholders seeking to acquire the outstanding shares of its subsidiary.