proceed without SC approval, a tender offer freeze-out does not require SC approval and, in fact,
is often initiated by the controller even before the SC is formed. The second reason is the
standard of judicial review, as described in Part 2.1. Entire fairness review for merger freeze-
outs may increase price ex post through a judicially-mandated payout to the minority, or ex ante
due to the “shadow” of a judicially mandated-payout (cf. Mnookin & Kornhauser 1979), or both.
hypothesis can be stated as follows:
H1: Controlling shareholders pay more in statutory merger freeze-outs than in
tender offer freeze-outs.
An important question is to what extent Hypothesis H1 might be valid outside of Delaware,
where Siliconix and Glassman are not binding precedent. As a starting point, I find that all U.S.
states provides fairness review for self-dealing (“conflict”) transactions such as merger freeze-
disinterested board committee cleanses the transaction of the self-dealing taint.15 Putting these
features together means that all U.S. states provide judicial review for fairness, veto power for an
SC of independent directors, or both, in merger freeze-outs.
Tender offer freeze-out doctrine is clearly different from this baseline approach on the
question of SC veto power. The board’s role in a tender offer is determined by federal law,
notably SEC Rule 14D-9, which requires the board or a committee thereof to issue a
recommendation to the minority. Notably absent from this federal regime is any ability for the
15 14 See, e.g., REV. MOD. BUS. CORP. Act § 8.61(b)(3) (transaction immune from attack if “the transaction, judged according to the circumstances at the time of commitment, is established to have been fair to the corporation.”). See, e.g., REV. MOD. BUS. CORP. Act § 8.61(b)(1).