## Facts

- Vishay Intertechnology, Inc. controlled Siliconix Incorporated through a subsidiary and owned about 80.4% of Siliconix’s common stock; public stockholders held the remaining 19.6%.
- Vishay commenced a stock-for-stock exchange offer to acquire the minority shares, offering 1.5 shares of Vishay stock for each Siliconix share.
- Siliconix created an independent special committee to evaluate and negotiate the proposed controller transaction.
- The special committee indicated it was unlikely to recommend the exchange offer as structured, citing concerns about the exchange ratio.
- Vishay nevertheless announced and commenced the exchange offer without special-committee approval.
- A minority stockholder filed consolidated class and derivative claims alleging the offer was unfair and coercive and that Siliconix’s directors breached fiduciary duties by failing to prevent or condition the offer on minority-protective procedures.
- The plaintiff sought a preliminary injunction to stop the offer before its scheduled expiration.
- The alleged coercion included: timing the offer to exploit a temporarily depressed Siliconix stock price; disclosure that Vishay might complete a short-form merger if it reached 90% ownership; and disclosure that Vishay might take steps leading to delisting or reduced liquidity for remaining shares.
- The plaintiff also alleged material disclosure deficiencies, including failure to disclose certain management projections and inadequate disclosure about the committee’s and advisor’s analyses.

## Issues

1. What standard governs judicial review of a controlling stockholder’s unilateral tender (exchange) offer for minority shares: entire fairness or a disclosure-and-coercion inquiry focused on whether stockholders can make a voluntary choice?
2. Did the plaintiff show a reasonable probability of success on claims that the offer was coercive or materially misleading?
3. Did the plaintiff show imminent irreparable harm and that the equities favored injunctive relief?

## Decision

- The Court of Chancery denied the motion for a preliminary injunction.
- The court declined to require the controller to establish entire fairness as a precondition to proceeding with a tender offer; the key inquiry was whether the offer was non-coercive and fully informed.
- The plaintiff failed to show a reasonable probability of success on alleged coercion or disclosure violations.
- The plaintiff failed to show irreparable harm because any injury from an inadequate price could be remedied by monetary relief or addressed in later statutory or fiduciary review if a subsequent merger occurred.
- The balance of equities did not support enjoining a transaction where informed stockholders retained the ability to accept or reject the offer.

## Legal Principles

- A preliminary injunction requires: (1) reasonable probability of success on the merits, (2) threat of imminent irreparable harm, and (3) a balance of equities favoring relief.
- In a controlling stockholder tender offer, judicial intervention centers on protecting stockholders’ ability to make a voluntary choice, which depends on (1) absence of improper coercion and (2) full and fair disclosure of material information.
- Entire-fairness review is not automatically imposed at the tender-offer stage solely because the bidder is a controller; absent coercion or material nondisclosure, stockholders’ ability to refuse the offer is a significant protective mechanism.
- Disclosed possibilities common to two-step controller acquisitions (including a potential short-form merger at a statutory threshold or reduced trading liquidity) do not, without more, constitute legally actionable coercion.
- Disclosure law does not require publication of every internal projection or item of soft information unless it is shown to be material to a reasonable stockholder’s decision.

## Conclusion

The court refused to enjoin a controlling stockholder’s exchange offer because the plaintiff did not show likely coercion or material nondisclosure, and monetary or later statutory/fiduciary remedies could address any unfair-price harm; the governing framework treated voluntariness and informed choice—not preclosing entire-fairness proof—as the central protections in the tender-offer context.


In re Siliconix Inc. S’holders Litig., 2001 WL 716787 (Del. Ch. June 19, 2001)