If there’s one Delaware Court of Chancery decision that Chancellor William Chandler second-guesses, it is the 16-year-old case of Paramount Communications v. Time, which upheld Time Inc.’s business judgment in rejecting a large acquisition offer in favor of pursuing its own merger plans.
His feelings today seem to indicate a sympathy, at least on some level, for shareholders whose positions have been overwhelmed by management’s argument.
“That was a very controversial decision because it did in a way look as though the court was saying, ‘Well, maybe the shareholders don’t know what’s best for them They want to take the short-term Paramount offer of $200 a share. But the directors of Time and Warner have this grand plan in the future that’s going to yield more for them, and they know better than those poor folks who don’t understand the markets.’”
Says the chancellor, noting Time Warner’s recent stock prices in the mid-teens: “I always sort of disagreed with Bill Allen [then-Chancellor, now a New York University professor] about that decision. I was new to the court then, so I wasn’t going to say much because he was more experienced than I. One could say that’s where we should have let the shareholders make their own choice, because they knew what was best.
“And boy did they ever.”