## Facts

- Arco Electronics, Inc., a Delaware corporation, negotiated at arm’s length with Loral Electronics Corporation for Loral to acquire all of Arco’s assets.
- The deal provided for Arco to sell all assets to Loral in exchange for Loral common stock.
- Arco would distribute the Loral shares to Arco stockholders and then dissolve.
- Arco’s stockholders approved the transaction by more than the statutory minimum required for an all-assets sale.
- A stockholder sued, alleging (1) unfairness and (2) that the transaction was a de facto merger requiring compliance with Delaware’s merger statute and providing appraisal rights.
- The plaintiff conceded he could not prove unfairness, leaving only the de facto merger/appraisal theory.
- The corporation moved for summary judgment, asserting the transaction was a valid sale of assets under Delaware law.

## Issues

1. Whether a sale of all corporate assets for acquirer stock, followed by distribution to stockholders and dissolution, must be treated as a de facto merger requiring compliance with Delaware’s merger statute.
2. Whether stockholders are entitled to appraisal rights for such a transaction despite compliance with Delaware’s asset-sale statute.

## Decision

- The court granted summary judgment for the corporation.
- The transaction was treated as a sale of assets authorized under 8 Del. C. § 271, not as a merger.
- Because the transaction complied with § 271 and no unfairness or wrongdoing was pursued, the court refused to recharacterize it as a merger.
- The plaintiff had no appraisal rights based on merger statutes for a § 271 asset sale.

## Legal Principles

- Delaware’s statutory provisions governing mergers and sales of all or substantially all assets are separate routes; compliance with the asset-sale statute is sufficient to validate an asset-sale transaction.
- Delaware courts will not apply a judicial de facto merger doctrine to recast a properly authorized asset sale as a merger based solely on similar economic effects.
- Appraisal rights are purely statutory and are not extended to transactions outside the statute granting them, absent an independent basis for equitable relief such as fraud or unfair dealing.

## Conclusion

The court upheld an arm’s-length, stock-for-assets transaction approved under the asset-sale statute and declined to treat it as a merger for appraisal purposes, holding that stockholder appraisal rights follow the statutory form chosen when the governing statute is satisfied.


Hariton v. Arco Elecs., Inc., 182 A.2d 22 (Del. Ch. 1962)