Delaware Chancery Court Dismisses Merger Litigation Suit

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The Delaware Court of Chancery recently ruled that a company's board of directors is vested with discretion to choose between competing buyout offers — even if the ultimate choice is favorable to the personal interests of the company's controlling stockholder and chief executive officer. The ruling was made in connection with the court's dismissal of a complaint alleging that the board of a medical device maker (the "target") had breached its fiduciary duties when it approved a cash and stock acquisition offer from another corporation (the "acquirer"). The acquisition had closed in June 2012 but stockholders were still pursuing damages, claiming that the target's board had rejected a better offer from an unnamed private equity firm because the acquirer's offer was more favorable for tax purposes for the target's controlling stockholder, who was also the company's CEO.