Delaware Court Upholds Poison Pill With 'Grandfather' Exemption for Existing Large Stockholder

Foley Partner Gardner Davis and Senior Counsel Danielle Whitley authored an article that appeared in Delaware Corporate, Westlaw Journal/Thomson Reuters on September 3, 2010 titled “Delaware Court Upholds Poison Pill With ‘Grandfather’ Exemption for Existing Large Stockholder.” The authors discuss the Delaware Chancery Court’s decision to uphold a shareholder rights plan, or “poison pill,” employed by Barnes & Noble to stop a dissident shareholder’s rapid accumulation of stock. Focusing on the court’s approval of a “grandfather” exemption that allowed a major shareholder to exceed the pill’s 20 percent limit but capped the investor’s holding at that level, the authors note that Barnes & Noble’s board was entitled to take reasonable and non-preclusive action to ensure that an activist investor was unable to seek control block advantages at the expense of other investors.