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Toys ‘R’ Yours: Court Defers To Board In Acquisition Bid

Martinek Paul J. | July 12, 2005

The Delaware Court of Chancery last month rejected an effort by shareholders of Toys “R” Us to thwart of an acquisition of the giant toy retailer—a decision that illustrates several key principals in the mergers and acquisitions field, including courts’ unwillingness to substitute their judgment for boards that deliberate carefully.

Shareholders had filed suit against Toys “R” Us claiming that a proposed $6.6 billion sale to a group led by Kohlberg Kravis Roberts & Co. should be blocked on the ground that the board had not secured the highest price for the company and had been too generous in providing deal protections.

But the Delaware court said the Toys “R” Us board acted reasonably in pursuing the deal and concluded that its agreement to pay a $247.5 million breakup fee to the Kohlberg Kravis group was justified.

“The bottom line is that the public...

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