J. Crew’s Shareholders Approve the Deal: May Still Get More

March 4, 2011

So, in a previous post, I wrote about how shareholders can recover an extra “bump” when their company is getting sold.  I mentioned that J. Crew shareholders were in a good position because Institutional Shareholder Services urged shareholders to vote “no” on the transaction.  If J.Crew’s board was sufficiently concerned that the shareholders voted down the deal, they could demand more from the buyer.

Well, J.Crew shareholders approved the transactions in spite of ISS’s recommendation, but all is not lost.  The lawsuit against J. Crew will continue, but without the leverage that the ISS to extract a settlement.  Instead, like explained here, shareholders must show that J. Crew’s board acted in bad faith in approving the transaction that the shareholders also approved.   Delaware law gives directors a lot of leeway, so it’ll be interesting to see how successful the litigation will be.

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