As Professor Subramanian demonstrates with cogent statistical evidence, now is the time for the courts to put Section 203 in the dock and examine its constitutional merits. Better still, the Delaware legislature should clean house and amend this provision's criteria. In practical effect, it forbids a competitive tender offer, injuring shareholders who benefit from tender offer premiums, and the national economy, which benefits from the gravitation of industrial resources to their highest-valued uses.
Following the U.S. Supreme Court's decision in Edgar v. MITE Corp., which invalidated an Illinois takeover statute, the federal district court in Delaware routinely enjoined application of the 1977 version of the Delaware takeover law at the commencement of tender offers. But uncertainty followed the Supreme Court's decision in CTS Corp. v. Dynamics Corp., sustaining Indiana's so-called "second generation" tender offer statute. As Harvey Pitt once said, students of the Supreme Court tend to hear the "mood music" of opinions, sometimes glossing over specific rulings; the mood music in Edgar was martial, while the music in CTS was soothing. Some surmised that second- and third-generation takeover laws were invulnerable provided the legislature tinkered with their mechanism after Edgar.
Business Organizations Law | Law
Stephen M. Shapiro & Dorothy S. Lund,
Time to Amend the Delaware Takeover Law,
Del. J. Corp. L.
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/4004