Sterling v. Mayflower Hotel Corp

93 A.2d 107 (1952)

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Nature of the Case

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Facts

Mayflower and Hilton are both Delaware corporations. Mayflower's sole business was the ownership and operation of its Mayflower hotel in D.C. It had 398,738 shares outstanding common stock with a $1 par value. Hilton acquired a majority of the outstanding Mayflower shares on December 18, 1946. Hilton made an offer to all the other minority stockholders to buy their shares for $19.10. As of March 25, 1952, Hilton owned all but 1/6 of the stock of Mayflower. The board of Mayflower, now composed of Hilton appointees retained consultants to make a study for the merger of Mayflower into Hilton. The study indicated that a fair basis of exchange was to be 3/4ths a share in Hilton for one share in Mayflower. No action was taken on that report but on January 7, 1952, it was proposed that a merger occur on a share for share exchange. This plan was approved by both boards. The stockholder vote came in overwhelming for approval of the merger. However, holders of 35,191 shares did not vote as they objected to the merger. P, holder of 32,295 shares of Mayflower stock filed this complaint seeking injunctive relief against consummation of the merger as its terms were grossly unfair to the minority shareholders and that Mayflower directors entered into the transaction in bad faith. A TRO was issued against the merger. The Chancellor heard a motion for preliminary injunction and found no fraud or bad faith and concluded that the plan was fair to the minority. P appealed.