## Facts

- Macmillan’s board initiated an auction for corporate control but delegated key responsibilities to its CEO, who had personal financial interests in the transaction’s outcome.
- The CEO selected financial advisors and directed aspects of the process in a manner that favored KKR and disadvantaged the competing Mills/Maxwell group.
- Macmillan’s advisors and management provided KKR informational advantages, including disclosure of a rival bid price and access to confidential information not comparably shared with Mills/Maxwell.
- Acting on management’s direction, advisors rejected an earlier Maxwell bid despite its offering a fair price for Macmillan stock.
- The board approved an asset option agreement (“lockup”) in favor of KKR, purportedly as the high bidder, giving KKR a structural advantage that threatened to chill or end further bidding.
- The Court of Chancery found the auction conduct was not evenhanded or neutral but denied a preliminary injunction because it believed Mills/Maxwell was not actually misled or deterred from bidding.
- Mills/Maxwell took an interlocutory appeal from the denial of injunctive relief.

## Issues

1. Whether, in a change-of-control auction, the board breached fiduciary duties by permitting conflicted management and advisors to run a biased, non-neutral process favoring one bidder.
2. Whether approving a lockup in the context of a compromised auction violated fiduciary duties by chilling the market and foreclosing a fair opportunity to obtain the best value reasonably available for stockholders.
3. Whether injunctive relief may be denied solely because the disadvantaged bidder was not shown to have been actually deterred from submitting a topping bid.

## Decision

- The Delaware Supreme Court reversed the Court of Chancery’s denial of injunctive relief and remanded.
- The court held the board breached fiduciary duties by failing to conduct and supervise a fair, evenhanded auction directed toward obtaining the best value reasonably available for stockholders.
- The court concluded the lockup could not stand because it was adopted within, and reinforced, an improperly skewed process that risked chilling further bidding.

## Legal Principles

- When a company is in a sale-of-control posture, directors must seek the highest value reasonably available for stockholders, and their conduct is reviewed under enhanced scrutiny focused on both process adequacy and action reasonableness.
- Directors may not abdicate control of the sale process to conflicted managers; they must provide active, direct oversight and ensure advisors are not captured by management interests.
- A sale process must be evenhanded among bidders; providing one bidder material informational advantages without a stockholder-centered justification can constitute a loyalty breach.
- Fiduciary review in this setting is process-focused; the absence of proven deterrence or bidder-specific harm does not cure a structurally biased auction.
- Deal-protection devices such as lockups are suspect when adopted to favor a bidder or to terminate competition before a reliable market test; they must be reasonably related to securing the best available value.

## Conclusion

The court required that boards running a change-of-control auction independently supervise a neutral, stockholder-focused process and may not validate a favored-bidder outcome through a lockup adopted after management has tilted the auction’s competitive conditions.


Mills Acquisition Co. v. Macmillan, Inc., 559 A.2d 1261 (Del. 1989)