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Keywords

injunctionappealmotionfiduciarycorporationfiduciary dutygood faithbreach of fiduciary duty
fiduciarycorporationfiduciary dutygood faithbreach of fiduciary duty

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Ivanhoe Partners v. Newmont Min. Corp., 535 A.2d 1334, 56 USLW 2311, Fed. Sec. L. Rep. P 93,552

Facts

The dispute arose during a takeover attempt by Ivanhoe Partners for Newmont Mining Corporation. In response to Ivanhoe's hostile tender offer, Newmont declared a $33 per share dividend and amended its standstill agreement with Gold Fields, allowing Gold Fields to increase its ownership from 26% to 49.7%. Ivanhoe argued that these actions were inequitable entrenchment devices that violated fiduciary duties under Delaware law. The Chancery Court initially granted a temporary restraining order but later denied Ivanhoe's motion for a preliminary injunction, leading to this appeal.

The dispute arose during a takeover attempt by Ivanhoe Partners for Newmont Mining Corporation. In response to Ivanhoe's hostile tender offer, Newmont declared a $33 per share dividend and amended its standstill agreement with Gold Fields, allowing Gold Fields to increase its ownership from 26% to 49.7%.

Issue

Did the actions taken by Newmont's board of directors, including the declaration of a dividend and the amendment of the standstill agreement with Gold Fields, constitute a breach of fiduciary duty and inequitable entrenchment in response to Ivanhoe's hostile tender offer?

Did the actions taken by Newmont's board of directors, including the declaration of a dividend and the amendment of the standstill agreement with Gold Fields, constitute a breach of fiduciary duty and inequitable entrenchment in response to Ivanhoe's hostile tender offer?

Rule

The court applied the principles established in Unocal Corp. v. Mesa Petroleum Co. and Revlon, Inc. v. MacAndrews & Forbes Holdings Inc., which require that a board of directors must act in good faith and with reasonable investigation when responding to a hostile takeover threat, and that their actions must be reasonable in relation to the threat posed.

The court applied the principles established in Unocal Corp. v. Mesa Petroleum Co. and Revlon, Inc. v. MacAndrews & Forbes Holdings Inc., which require that a board of directors must act in good faith and with reasonable investigation when responding to a hostile takeover threat, and that their actions must be reasonable in relation to the threat posed.

Analysis

The court found that Newmont's board acted in good faith and after reasonable investigation in response to the threats posed by both Ivanhoe and Gold Fields. The board's decision to declare a dividend and amend the standstill agreement was deemed a reasonable defensive measure to protect the company's independence and the interests of its shareholders. The court concluded that the board's actions were within the ambit of the business judgment rule, as they were aimed at maintaining the company's independence rather than entrenching the current management.

The court found that Newmont's board acted in good faith and after reasonable investigation in response to the threats posed by both Ivanhoe and Gold Fields. The board's decision to declare a dividend and amend the standstill agreement was deemed a reasonable defensive measure to protect the company's independence and the interests of its shareholders.

Conclusion

The Delaware Supreme Court affirmed the Chancery Court's decision, concluding that Newmont's board had a duty to oppose the takeover threats and that the defensive measures taken were reasonable and protected by the business judgment rule.

The Delaware Supreme Court affirmed the Chancery Court's decision, concluding that Newmont's board had a duty to oppose the takeover threats and that the defensive measures taken were reasonable and protected by the business judgment rule.

Who won?

Newmont Mining Corporation prevailed in the case because the court found that its board acted within its rights to oppose the hostile takeover and that the defensive measures were reasonable and in good faith.

Newmont Mining Corporation prevailed in the case because the court found that its board acted within its rights to oppose the hostile takeover and that the defensive measures were reasonable and in good faith.

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