## Facts

- Hollinger International, Inc. was a Delaware corporation with two principal newspaper businesses: the U.K. Telegraph Group Ltd. and a U.S. Chicago-based newspaper group.
- Hollinger Inc., a Canadian corporation, owned roughly 18% of International’s equity but controlled about 68% of its voting power through high-vote shares.
- After governance and misconduct controversies tied to Hollinger Inc. and affiliates, International’s board became dominated by independent directors.
- The board conducted a broad sales process in which International and its operating assets were shopped to potential bidders.
- International agreed to sell the Telegraph Group to a buyer controlled by the Barclay brothers.
- The board received financial advice indicating the agreed price exceeded the present value of Telegraph’s projected cash flows.
- Hollinger Inc. sought a preliminary injunction to block the sale, asserting (i) the transaction required a stockholder vote under 8 Del. C. § 271, (ii) a controlling stockholder had an equitable right to veto the sale, and (iii) the board’s decision reflected an actionable duty-of-care breach.

## Issues

1. Whether the Telegraph sale constituted a sale of “all or substantially all” of International’s assets requiring stockholder approval under 8 Del. C. § 271.
2. Whether a controlling stockholder has a non-statutory equitable “natural right” to veto a good-faith board decision to sell a major asset.
3. Whether independent directors likely breached the duty of care (gross negligence standard) by approving the sale after considering alternatives, running an auction, and relying on financial advice.

## Decision

- The Court of Chancery denied Hollinger Inc.’s motion for a preliminary injunction.
- The court held the Telegraph sale was not a sale of “all or substantially all” assets under § 271, so no stockholder vote was required.
- The court rejected any non-statutory equitable veto right for the controlling stockholder over the board’s business decision.
- The court found no reasonable likelihood that the directors breached the duty of care, and the business judgment rule protected the decisionmaking process.
- Because Hollinger Inc. failed to show a reasonable probability of success on the merits, extraordinary injunctive relief was unwarranted.

## Legal Principles

- A transaction triggers stockholder approval under 8 Del. C. § 271 only if it is a sale of “all or substantially all” corporate assets, assessed using both quantitative and qualitative considerations.
- A sale is not “substantially all” when, after the transaction, the corporation retains a substantial, viable, and profitable business and its future prospects are not fundamentally destroyed.
- Management of the corporation’s business and affairs is vested in the board of directors; stockholder power, including that of a controller, is limited to rights granted by statute and the corporate charter.
- Delaware’s duty-of-care standard for disinterested directors is gross negligence; informed, good-faith decisions following meaningful consideration of alternatives, a fair sales process, and reliance on competent advisors are generally protected by business judgment review.
- Preliminary injunctive relief requires, at minimum, a reasonable probability of success on the merits; failure on core merits theories defeats that showing.

## Conclusion

The court refused to enjoin International’s sale of the Telegraph Group because the deal did not require a stockholder vote under § 271, the controlling stockholder had no extra-statutory veto power over the board’s decision, and the independent directors’ process was sufficiently informed and deliberative to defeat a likely duty-of-care claim.


Hollinger Inc. v. Hollinger Int’l, Inc., 858 A.2d 342 (Del. Ch. 2004)