Airgas, Inc. v. Air Products And Chemcials Inc

8 A.3d 1182 (2010)

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Nature of the Case

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Facts

D launched a public tender offer to acquire 100% of P’s shares. P’s board kept rejecting the offers made claiming that D undervalued the company. The market prices of P stock exceeded D’s offers during this time frame. D engaged in a proxy contest. P has a staggered board with nine directors, and three were up for election at that meeting. A staggered board makes it more difficult for an acquirer, such as D, to gain control of its target without the consent of the board. On the September 15, 2010, annual meeting, D nominated three directors, and the shareholders elected them. D also proposed a bylaw that would schedule P's next annual meeting just four months after the 2010 annual meeting. This bylaw, which was approved by only 45.8% of the shares entitled to vote, effectively reduced the full term of the incumbent directors by eight months. P sued in the Court of Chancery, claiming that this bylaw is invalid because it is inconsistent with title 8, section 141 of the Delaware Code and P's corporate charter provision that creates a staggered board. The charter requires an affirmative vote of the holders of at least 67% of the voting power of all shares to alter, amend, or repeal the staggered board provision, or to adopt any bylaw inconsistent with that provision. The Court of Chancery ruled for D in that the wording of the charter provides that directors serve terms that expire at 'the annual meeting of stockholders held in the third year following the year of their election.' There was no inconsistency between P's charter provision and the new bylaw because the January meeting would occur 'in the third year after the directors' election,' which (the Court of Chancery found) was all that the P charter requires. This appeal resulted.