In In re Family Dollar Stores, Inc. Stockholder Litigation, C.A. No. 9985-CB (Del. Ch. Dec. 19, 2014), the Court of Chancery declined to preliminarily enjoin the stockholder vote on the merger of Family Dollar Stores, Inc. and Dollar Tree, Inc., pursuant to which Dollar Tree would acquire Family Dollar for a combination of cash and Dollar Tree stock. After Family Dollar agreed to merge with Dollar Tree, Dollar General, Inc. sought to acquire Family Dollar. When Family Dollar’s board refused to engage in negotiations, Dollar General commenced a public tender offer to acquire Family Dollar shares. Unlike the merger between Family Dollar and Dollar Tree, where antitrust approval was considered to be a formality, Dollar General’s tender offer has not received antitrust approval.
Stockholders of Family Dollar sought to enjoin the vote on the merger until Family Dollar’s board engaged with Dollar General and made corrective disclosures. The plaintiffs’ core claim was that Family Dollar’s board breached its fiduciary duty under Revlon when it declined to engage with Dollar General. The Court concluded that the plaintiffs failed to demonstrate a reasonable probability of success on any of their claims. The Court found that Family Dollar’s board was properly motivated to maximize Family Dollar’s value. Noting the advice that Family Dollar’s board received with respect to the significant antitrust risks associated with a potential transaction with Dollar General, the Court found that Family Dollar’s board had acted reasonably under the no shop provisions of its agreement with Dollar Tree in determining not to engage with Dollar General.
The Court also concluded that the plaintiffs failed to demonstrate the existence of irreparable harm or that the balance of the equities favored a preliminary injunction, stating that nothing prevented Dollar General from improving its offer to address the antitrust risks, while noting that the entry of a preliminary injunction would deprive Family Dollar’s stockholders of the opportunity to decide whether to approve a premium transaction offering apparent deal certainty.