Richards Layton & Finger

Chancery Finds Allegations of 'Control Group' Sufficient to Invoke Entire Fairness Review of Merger

April 25, 2012

In Frank v. Elgamal, C.A. No. 6120-VCN (Del. Ch. Mar. 30, 2012), the Delaware Court of Chancery held that the entire fairness standard would apply to the merger of American Surgical Holdings Inc. with an unaffiliated private equity purchaser. A key issue in the court's analysis was whether the plaintiff had adequately alleged that American Surgical had a "control group." Because the court concluded that a control group had been adequately alleged, the court found that the merger would be subject to entire fairness review under the standard set forth in In re John Q. Hammons Hotels Inc. Shareholders Litigation, WL 3165613 (Del. Ch. Oct. 2, 2009).