## Facts

- Grand Metropolitan Limited formed a wholly owned subsidiary (GM Sub) to acquire Liggett Group, Inc. through a tender offer.
- GM Sub made a tender offer for all Liggett common stock at $69 per share, a substantial premium; Liggett’s board approved and recommended the offer.
- GM Sub acquired approximately 87.4% of Liggett shares through the tender offer, giving it control.
- Gabelli & Co., Inc. Profit Sharing Plan, a minority shareholder holding 800 shares, did not tender.
- After acquiring control, GM Sub completed a cash-out merger effective August 6, 1980, eliminating the remaining minority shares for $69 per share.
- Liggett historically paid a third-quarter dividend with a record date in mid-August, but after the August 6 merger no third-quarter dividend was declared or paid.
- Gabelli alleged the merger was timed to cut off minority shareholders’ expected third-quarter dividend and asserted fiduciary-duty violations.
- The Court of Chancery granted summary judgment for defendants; Gabelli appealed.

## Issues

1. Whether a controller and directors breach fiduciary duties by timing a cash-out merger before a historically expected dividend, resulting in no dividend payment to the former minority.
2. Whether minority shareholders have a legal or equitable right to a dividend that has not been declared by the board before the merger’s effective time.

## Decision

- The Delaware Supreme Court affirmed summary judgment for the defendants.
- The court held minority shareholders had no legal or equitable entitlement to a dividend that had not been declared.
- The court held merger timing, without a vested dividend right or evidence of inequitable conduct affecting price or process, did not establish a fiduciary-duty breach.

## Legal Principles

- Stockholders have no vested right to a dividend until the board declares it; a pattern of past dividends does not create an enforceable right to a future dividend.
- A controlling stockholder may exercise statutory merger rights; timing decisions that incidentally eliminate the chance to receive an undeclared dividend do not, by themselves, constitute unfair dealing.
- Absent a challenge to the fairness of the merger consideration or specific evidence of inequitable conduct, courts will not add an implied “dividend component” to the cash-out price to compensate for an undeclared dividend.

## Conclusion

Because no third-quarter dividend had been declared before the cash-out merger became effective, the minority had no enforceable dividend right, and the merger’s timing—without proof of unfair price or wrongful conduct—did not support fiduciary-duty liability.


Gabelli & Co. Profit Sharing Plan v. Liggett Grp., Inc., 479 A.2d 276 (Del. 1984)