## Facts

- Equity Group Holdings owned about 27.1% of DMG, a Florida corporation whose shares traded on the NYSE and that was a wholly owned subsidiary of Diversified Mortgage Investors, Inc. (DMI).
- DMI had a large tax-loss carryforward and an outstanding bank loan.
- DMG agreed to issue authorized voting preferred shares to Carlsberg Corporation in exchange for convertible preferred shares held by Carlsberg Resources (Carlsberg’s subsidiary).
- The same day, DMG, DMI, and Carlsberg agreed that Carlsberg would merge into DMI; Carlsberg shares would be converted into DMG common stock through new DMG shares issued to Carlsberg shareholders.
- After the exchange and merger, Carlsberg shareholders would hold approximately 64% of DMG’s common stock, shifting control away from existing shareholders.
- Equity sought a preliminary injunction, arguing the integrated steps were a “de facto merger” of DMG requiring approval by a majority of DMG’s outstanding shares under Florida Corporation Act § 607.221.
- The court held an evidentiary hearing on stipulated facts, affidavits, memoranda, and exhibits; no live testimony was presented.

## Issues

1. Whether Florida Corporation Act § 607.221 required approval by a majority of DMG’s outstanding shares for the issuance of DMG shares connected to the DMI–Carlsberg merger because the overall transaction functioned as a merger or “de facto merger” of DMG.
2. Whether Equity satisfied the requirements for a preliminary injunction, including likelihood of success on the merits and irreparable harm.

## Decision

- The court denied Equity’s motion for a preliminary injunction.
- The court concluded Equity did not show a substantial likelihood of success on its theory that the transaction was a de facto merger triggering § 607.221’s majority-of-outstanding-shares voting requirement for DMG.
- The court treated the transaction as an upstream statutory merger (DMI–Carlsberg) coupled with a DMG share issuance and declined to recharacterize it as a statutory merger of DMG for voting purposes.

## Legal Principles

- A preliminary injunction requires, at minimum, a substantial likelihood of success on the merits and a showing of irreparable harm, evaluated along with the balance of harms and the public interest.
- Florida’s statutory merger voting requirements apply based on whether the corporation is a constituent party to the statutory merger; a control-shifting stock issuance linked to an upstream merger does not, without more, become a merger of the issuing corporation under § 607.221.
- Courts may reject “de facto merger” recharacterizations when the challenged steps fit within recognized corporate actions and the relevant corporation retains its separate legal identity.

## Conclusion

The court refused to treat a DMG stock issuance coupled with an upstream DMI–Carlsberg merger as a de facto merger of DMG requiring a majority-of-outstanding-shares vote under Florida’s merger statute, and it denied preliminary injunctive relief because the plaintiff failed to show the necessary likelihood of success and equitable grounds.


Equity Grp. Holdings v. DMG, Inc., 576 F. Supp. 1197 (S.D. Fla. 1983)