DOVER, Del. (CN) - Lear Corp. executives did not breach their fiduciary duty to shareholders when they agreed to pay a bidder $25 million in exchange for increasing his bid if the enhanced bid failed, the Delaware Court of Chancery ruled.
Stockholders were already suing the automotive-parts maker to block a proposed buyout, claiming the $36 per-share price was too low. The Lear board tried to get the unrivaled bidder, Carl Icahn, to increase the price by $1.25 per share by promising him $25 million if shareholders still voted no.
The plaintiffs alleged that the board acted in bad faith by agreeing to the $25 million fee, "knowing that it was improbable that its stockholders would agree to the enhanced deal."
"Directors are entitled to make good faith business decisions even if the stockholders might disagree with them," Vice Chancellor Strine wrote. "The directors cannot be faulted for being disloyal simply because the stockholders ultimately did not agree with their recommendation."
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