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shareholders through a tender offer without gaining SC approval. Aronstam, Balotti & Rehbock

(2003) similarly propose a hybrid approach, urging a “limited fairness hearing” for freeze-out

tender offers, or an amendment to the Delaware appraisal statute to require the controller to pay

all minority shareholders the appraised valued of their shares.

At the other end of the spectrum, some commentators defend the Siliconix/Glassman

doctrinal contour. Pritchard (2004) argues that the gap in standards of review represents a one-

time wealth transfer from minority shareholders to controllers that will be solved ex ante through

lower prices that investors will pay for a minority stake. Pritchard (2004) and Abramczyk,

Cincilla & Honaker (2003) argue that minority shareholders have adequate protections against

coercive tender offers even in the absence of entire fairness review. To support this view, some

commentators point to the fact that target boards generally establish a special committee to

negotiate with the controller even if the controller proceeds via tender offer. As illustrations,

practitioners point to Intimate Brands’ negotiation with its controlling shareholder Limited; TD

Waterhouse’s negotiation with its controller Toronto-Dominion Bank; and Prodigy

Communications’ negotiation with its controller SBC Communications. All three of these deals

were post-Siliconix freeze-outs executed through tender offers. In all three transactions, the

target established a special committee of independent directors to negotiate with the controller.

And in all three, the special committee was able to negotiate an increase over the controller’s

initial offer. This anecdotal evidence suggests that a special committee in a tender offer freeze-

out might have substantial bargaining power against the controlling shareholder.


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