In ''Paramount Communications, Inc. v. QVC Network, Inc.'', 637 A.2d 34 (Del. 1994), the Delaware Supreme Court clarified the type of transaction that triggers ''

Revlon Revlon, Inc. is an American multinational company dealing in cosmetics, skin care, fragrance, and personal care. The headquarters of Revlon was established in New York City on March 1, 1932, where it still remains. Revlon was founded by brothe ...

'' duties.

Facts

This case, an appeal from a decision of the

Delaware Chancery Court The Delaware Court of Chancery is a court of equity in the American state of Delaware. It is one of Delaware's three constitutional courts, along with the Supreme Court and Superior Court. Since 2018, the court consists of seven judges. The chie ...

, involved a proposed

merger Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspect ...

between

Viacom Viacom, an abbreviation of Video and Audio Communications, may refer to: * Viacom (1952–2006), a former American media conglomerate * Viacom (2005–2019), a former company spun off from the original Viacom * Viacom18, a joint venture between Par ...

and

Paramount Communications Paramount Pictures Corporation is an American film and television production and distribution company and the main namesake division of Paramount Global (formerly ViacomCBS). It is the fifth-oldest film studio in the world, the second-oldest ...

; as part of the merger agreement, Paramount agreed to an array of defensive measures, including a no-shop provision, $100 million

termination fee {{About, fees for breaking terms of agreements or long-term contracts, Interconnect fees in (telephone) networks, Termination rates An early termination fee is a charge levied when a party wants to break the term of an agreement or long-term contra ...

and a lock-up option on approximately 20% of Paramount’s

common stock Common stock is a form of corporate equity ownership, a type of security. The terms voting share and ordinary share are also used frequently outside of the United States. They are known as equity shares or ordinary shares in the UK and other Com ...

. However, QVC intervened with its own, facially more generous merger proposal, conditioned on cancellation of the defensive measures. The Paramount board refused to conduct a formal bidding process with QVC on the grounds that it would be inconsistent with its contractual obligations to Viacom. The court found that,

Holding

;''Revlon'' triggers :When a corporation undertakes a transaction which will cause (a) a change in corporate control, or (b) a break-up of the corporate entity, the directors' obligation is to seek the best value reasonably available to the stockholders ;Burden of proof :The "directors have the burden of proving that they were adequately informed and acted reasonably." ;Key features of the enhanced scrutiny test :The courts will look into the adequacy of the directors’ decision making process, including what information they used in coming to their decision. In addition, the court will consider the reasonableness of the directors’ action in light of the circumstances then existing.

External links

* {{caselaw source , case = ''Paramount Communications, Inc. v. QVC Network, Inc.'', 637 A.2d 34 (Del. 1994) , courtlistener =https://www.courtlistener.com/opinion/1947768/paramount-communications-v-qvc-network/ , googlescholar = https://scholar.google.com/scholar_case?case=18043382785093371066 , justia =https://law.justia.com/cases/delaware/supreme-court/1994/637-a-2d-34-5.html United States corporate case law Delaware state case law 1994 in United States case law 1994 in Delaware Paramount Global Paramount Pictures QVC

Facts

Holding

See also

External links