standards of review, as well as the implicit degree of endorsement of Siliconix and Glassman
outside of Delaware, Hypothesis H1 may have a stronger theoretical grounding in Delaware than
in other states.
3.2. Shareholder approval requirement
A second factor that might influence the price paid to minority shareholders is the approval
mechanism versus the traditional merger route, academic commentators to date have not noted
important differences in the minority approval required across transactional forms. Specifically,
the level of minority shareholder approval is determined by which of three transaction structures
is used: a merger freeze-out without a majority-of-the-minority (MOM) condition; a merger
freeze-out with a MOM condition; or a tender offer freeze-out. In this Part I examine each of
these in turn.
First, a merger freeze-out without a MOM condition requires little or no approval from the
minority. If the controller holds more than 50%, it can unilaterally approve the transaction by
voting its shares in favor of the merger.17 If the controller holds less than 50%, it needs minimal
approval from the minority. For example, a 40% controlling shareholder would require an
additional 10% of shares outstanding, or 17% of the minority (10% out of the remaining 60%) in
order to approve the transaction.18
17 See, e.g., Balanced Care Schedule 14A (July 19, 2002) (“For the merger to occur, the merger agreement must be adopted and the transactions it contemplates, including the merger, approved by the holders of a majority of the outstanding shares entitled to vote on the merger. IPC owns approximately 53% of our outstanding common stock. IPC has informed us that it intends to vote in favor of adoption of the merger agreement and approval of the transactions its contemplates, including the merger, and you should therefore expect that each of these will be approved at the special meeting regardless of the votes of any other stockholders.”).
18 See, e.g., Storage USA 8-K (Nov. 5, 2001) (“As of the record date, Security Capital beneficially owned 11,765,654 shares, or approximately 41.3% of our common stock. Security Capital has informed us that it intends to vote its Storage USA shares in favor of the purchase agreement and the Transactions. Storage USA’s directors and executive officers own approximately 2.3% of our common stock and to our knowledge they intend to vote their