## Facts

- Arco Electronics, Inc., a Delaware corporation, negotiated with Loral Electronics Corporation to combine their businesses.
- Arco and Loral executed a reorganization agreement in which Arco would sell all its assets to Loral in exchange for shares of Loral stock.
- The plan also required Arco to seek stockholder approval for both the asset sale and Arco’s voluntary dissolution.
- After consummation, Arco would distribute the Loral shares it received to Arco’s stockholders as part of Arco’s liquidation.
- Approximately 80% of Arco’s voting shares approved the plan, and the transaction was completed.
- A stockholder, Martin Hariton, did not vote and sued to enjoin the transaction as illegal, arguing it was effectively a merger and should have provided merger-related protections (including appraisal rights).
- Hariton abandoned any claim that the transaction was unfair, leaving only the legality challenge.
- The Court of Chancery granted summary judgment for Arco and dismissed the complaint; Hariton appealed.

## Issues

1. Whether an all-assets sale for the purchaser’s stock, coupled with dissolution and distribution of that stock to the seller’s stockholders, is invalid because it is functionally equivalent to a merger requiring compliance with the merger statute.
2. Whether Delaware recognizes a “de facto merger” doctrine that would impose merger procedures and appraisal rights on a transaction structured to comply with the asset-sale and dissolution statutes.

## Decision

- The Delaware Supreme Court affirmed summary judgment for Arco.
- The court held the transaction was a valid sale of assets under the asset-sale statute, followed by a lawful dissolution and liquidating distribution under the dissolution provisions.
- The court rejected the claim that the transaction had to be treated as a merger merely because it produced a merger-like economic result.
- The court denied appraisal-rights relief because appraisal was not available for this form of asset sale under the governing statutes.

## Legal Principles

- Statutory merger provisions and statutory asset-sale provisions are independent routes for effecting major corporate transactions; compliance with one is not invalidated because the outcome resembles the other.
- Delaware will not apply a de facto merger doctrine to recharacterize a transaction that satisfies the requirements for an asset sale and dissolution, solely to impose merger-related procedural or appraisal rights.
- Courts will not create appraisal rights by judicial construction where the legislature provided appraisal for mergers but did not extend it to asset sales.

## Conclusion

Delaware upheld an all-assets sale for buyer stock followed by dissolution and distribution to stockholders, holding that statutory compliance with the asset-sale and dissolution provisions sufficed and that merger-style appraisal protections could not be judicially imposed through a de facto merger theory.


Hariton v. Arco Elecs., Inc., 188 A.2d 123 (Del. 1963)