Applestein v. United Board & Carton Corp.

159 A.2d 146 (1960)

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Nature of the Case

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Facts

United is a public company with authorized stock of 400,000 shares of which 240,000 had been issued with no single stockholding holding over 10% of the shares. The stock was held by over 1,086 shareholders and was traded on the NYSE. Interstate was engaged in the business of manufacturing and selling corrugated shipping containers. It has issued 1,250 shares all owned by a single stockholder, Epstein. United entered into a written agreement with Interstate to exchange and deliver 160,000 of its shares for the 1,250 shares of Interstate held by Epstein. By this exchange of stock, United would own Interstate, and its subsidiaries and Epstein would own 40% of United. There was no hint or mention of the word merger in any of the documents. Interstate would not survive this transaction as all its officers and directors were to resign. United’s by-laws were to be amended to increase its directors from 7 to 11, and it was preordained who would be the new directors. Epstein was to become the president of United. The proposal was submitted to a vote of United shareholders pursuant to NYSE rules, and those who voted against it would not be entitled to an appraisal of their stock. The parties contend that the transaction is a valid purchase by United of Interstate followed by a merger of United as the parent company. Applestein (P) opposed the transaction contending it was a merger and he was entitled to appraisal rights and a 2/3^rd vote for approval.