Kahn v. Lynch

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  • Alcatel (parent) owed 43% of Lynch (partially owned sub) stock. They are ruled to be a controller of Lynch.
  • Kahn is a shareholder in Lynch.
  • Lynch, which specializes in fiber optics, wants to merge with Telco.
  • Alcatel wants Lynch to merge with Celware (who is also a sub of Alcatel)
  • According to DGCL, the company should merge with whichever company would be best for its shareholders (in this case this would be to merge with Telco).
  • Lynch's independent committee which is bargaining at arms length and tells the parent that they are offering too little..
    • Alcatel gives another offer and says that if it isn't accepted, they will make a hostile tender offer and in this case the stockholders will make even less.
  • Because of this, the independent committee takes the $14 price.

Court:

  • This was not arm's length transaction because Lynch caved at the end and violated their feduciary duty.