Paramount Commc'n v. QVC Network Inc
In Paramount Commc'n v. QVC Network Inc., 637 A.2d 34, 47 (Del. 1993), the Delaware Supreme Court explained why a stock-for-stock merger does not result in a change of control where the remaining corporation is owned by a "fluid aggregation of unaffiliated voters." 637 A.2d at 46.
In that regard, it noted its prior decision in Paramount Commc'ns v. Time Inc., 571 A.2d 1140, 1151 (Del. 1989), where it approved the Chancellor's conclusions regarding when a change of control occurs, as follows:
Surely under some circumstances a stock for stock merger could reflect a transfer of corporate control. That would, for example, plainly be the case here if Warner were a private company. But where, as here, the shares of both constituent corporations are widely held, corporate control can be expected to remain unaffected by a stock for stock merger. This in my judgment was the situation with respect to the original merger agreement. When the specifics of that situation are reviewed, it is seen that, aside from legal technicalities and aside from arrangements thought to enhance the prospect for the ultimate succession of Nicholas J. Nicholas, Jr., president of Time, neither corporation could be said to be acquiring the other. Control of both remained in a large, fluid, changeable and changing market.
The existence of a control block of stock in the hands of a single shareholder or a group with loyalty to each other does have real consequences to the financial value of "minority" stock. The law offers some protection to such shares through the imposition of a fiduciary duty upon controlling shareholders. But here, effectuation of the merger would not have subjected Time shareholders to the risks and consequences of holders of minority shares. This is a reflection of the fact that no control passed to anyone in the transaction contemplated. The shareholders of Time would have "suffered" dilution, of course, but they would suffer the same type of dilution upon the public distribution of new stock. QVC, 637 A.2d at 46-47 (quoting Paramount Commc'ns Inc. v. Time Inc., No. 10866 (Del. Ch. July 17, 1989)).
The Court explained that a key reason behind imposing Revlon duties is concern regarding actions where the shareholder's voting power is diminished. Id. at 45.