Kahn v. Lynch Communication Sys., Inc.

669 A.2d 79 (Del. 1995)

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Nature of the Case

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Facts

In 1981, D bought 30.6% of Lynch Communications Systems (Lynch). One of the conditions of the purchase was a super-majority provision that would require an 80% vote of shareholders to approve any business combination or merger. This, along with proportional representation on the board, gave D considerable power in dealing with mergers and acquisitions. In 1986, Dl offered to acquire the remaining Lynch stock that it did not own at $14 per share. An Independent Committee was formed, and they concluded that $14 was too low and said that $17 was a fair price. D then offered $15.25, which was also rejected. D then offered $15.50 as their final offer. Two Alcatrel board members told the Independent Committee that if the offer of $15.50 were not accepted, D would proceed with 'an unfriendly tender offer at a lower price.” The offer of $15.50 was then approved by the committee and later approved by the management of Lynch. In the first proceeding, both sides produced experts that varied widely in their appraisal of the fair value of the shares.