## Facts

- Minority stockholders challenged a merger between Synthes, Inc., a publicly traded medical-device company, and Johnson & Johnson (J&J).
- Hansjörg Wyss, Synthes’s founder and board chairman, owned about 38.5% of the company and was alleged to control a majority when family and trust holdings were included.
- Plaintiffs alleged Wyss wanted liquidity and could not exit through incremental public sales without depressing the stock price, making a single-buyer transaction preferable.
- The board explored strategic alternatives with a financial advisor, contacted multiple strategic buyers, and also engaged with private equity firms; only J&J remained a serious strategic acquirer.
- Private equity indications of interest included proposals at up to CHF 150 per share in cash; later, a consortium made a firm CHF 151 per share proposal conditioned on Wyss rolling over a substantial equity stake rather than receiving full liquidity.
- After negotiations, J&J agreed to pay CHF 159 per share, using approximately 65% J&J stock (subject to a collar) and 35% cash.
- Under the J&J merger, all stockholders—including Wyss—received the same mix of consideration per share, and Wyss received no side benefits or non-ratable consideration.
- The merger agreement included customary deal protections, including a no-shop with fiduciary out, matching rights, a force-the-vote provision, and a termination fee of about 3.05% of equity value.
- Synthes’s charter included a Delaware General Corporation Law § 102(b)(7) provision exculpating directors from monetary liability for duty-of-care breaches.
- Defendants moved to dismiss under Court of Chancery Rule 12(b)(6).

## Issues

1. Whether a controlling stockholder’s preference for liquidity, and refusal to support a structure requiring the controller to remain invested while the minority is cashed out, creates a controller conflict triggering entire fairness review when the controller receives the same consideration per share as the minority.
2. Whether the pleaded facts stated a reasonably conceivable, non-exculpated claim that the controller or directors breached fiduciary duties in negotiating and approving the merger, including the sale process and deal protections.

## Decision

- The court granted defendants’ motion to dismiss and dismissed the complaint with prejudice.
- The court held that business judgment review applied because the alleged controller received the same pro rata merger consideration as the minority and extracted no non-ratable benefit.
- Applying business judgment at the pleading stage, the court found the complaint did not plead disloyalty, bad faith, or other non-exculpated wrongdoing by the directors.

## Legal Principles

- Entire fairness is generally not triggered by a controller’s liquidity preference where the controller receives identical per-share consideration as the minority and does not obtain unique benefits or disparate treatment.
- Delaware law does not require a controller to accept a transaction structure that leaves the controller worse off than the minority (e.g., added rollover risk for the controller while the minority receives full liquidity).
- Under business judgment review, a plaintiff must plead facts supporting a rational inference of disloyal conduct, bad faith, or other actionable fiduciary breach; conclusory disagreement with deal structure or strategy is insufficient.
- Where directors are protected by a § 102(b)(7) exculpatory provision, claims for monetary damages must plead non-exculpated misconduct (typically loyalty breaches or bad faith), not merely an allegedly imperfect process.
- Standard deal protections are not actionable absent well-pled facts that they were coercive or preclusive, or otherwise unreasonable in light of the board’s efforts to obtain the best value reasonably available.

## Conclusion

The court held that a controller’s desire for liquidity did not create a disabling conflict in an arm’s-length merger where the controller and minority received the same pro rata consideration; applying business judgment and considering director exculpation, the court dismissed the fiduciary-duty claims with prejudice.


In re Synthes, Inc. S’holder Litig., 50 A.3d 1022 (Del. Ch. 2012)