## Facts

- In late 1987, The Bank of New York Company, Inc. (BNY) sought to acquire all outstanding shares of Irving Bank Corporation (IBC).
- IBC’s board rejected BNY’s overtures, and the matter became a contested hostile takeover.
- BNY announced a two‑step acquisition plan:
  - First, BNY would buy at least a majority (and potentially all) of IBC’s shares for consideration consisting of cash plus BNY shares (described as a set cash amount plus between one and two BNY shares per IBC share).
  - Second, after acquiring shares, BNY stated it hoped to merge IBC into BNY or a BNY affiliate.
- BNY’s certificate of incorporation authorized issuance of additional BNY shares, and BNY obtained shareholder approval by a majority vote for the share issuance and acquisition plan.
- BNY shareholders were not asked to approve any merger agreement, and no merger was presented for vote.
- A merger could not occur quickly even if BNY obtained control, because New York Business Corporation Law (BCL) § 912 restricted certain business combinations with an acquired corporation for five years absent prior approval by the target’s board.
- IBC, suing as both the takeover target and a shareholder of BNY, sought summary judgment or, alternatively, a preliminary injunction to stop BNY from implementing the acquisition plan unless BNY first obtained approval of two‑thirds of its shareholders under former BCL § 903 (the merger approval statute).
- IBC argued BNY’s plan should be treated as a merger in substance under the de facto merger doctrine.
- BNY argued the complaint failed to state a valid claim because the transaction at issue was a stock acquisition, not a merger, and the statutory merger vote requirement was not triggered.

## Issues

1. Whether BNY’s two‑step plan to acquire IBC through a stock purchase, coupled with an expressed hope for a later merger, constituted a de facto merger requiring two‑thirds shareholder approval under former BCL § 903.

## Decision

- The court denied IBC’s motion for summary judgment and its alternative request for a preliminary injunction.
- The court granted BNY’s motion to dismiss for failure to state a cause of action under CPLR 3211(a)(7).
- The court held that BNY’s proposed stock acquisition did not amount to a de facto merger and therefore did not require a two‑thirds vote of BNY shareholders under former BCL § 903.

## Legal Principles

- The de facto merger doctrine is a narrow, equitable doctrine traditionally applied where a transaction structured as an asset sale is, in substance, a merger intended to avoid statutory merger protections.
- A purchase of a target’s stock, without an immediate transfer of the target’s assets to the acquirer and without the target’s near‑term disappearance as a separate corporation, is generally not treated as a merger for purposes of merger‑vote statutes.
- A bidder’s stated intention or hope to pursue a merger in the future does not convert a present stock acquisition into a merger substitute, especially where the later merger is contingent and may be delayed or barred by other statutory rules.
- Courts are reluctant to extend de facto merger treatment in a way that would effectively rewrite the statutory approval framework chosen by the Legislature for stock acquisitions, share issuances, and business combinations.

## Conclusion

The court refused to recharacterize BNY’s hostile, two‑step takeover plan as a merger at the stock‑purchase stage. Because the acquisition contemplated buying IBC shares while leaving IBC in existence as a separate corporation (at least initially) and any later merger was uncertain and subject to statutory limits, the plan did not qualify as a de facto merger. As a result, former BCL § 903’s two‑thirds shareholder vote for mergers was not required, and IBC’s claims were dismissed.


Irving Bank Corp. v. Bank of New York Co., 530 N.Y.S.2d 757 (1988)