## Facts

- Time’s board pursued a long-term strategy to expand into entertainment and negotiated a stock-for-stock merger with Warner structured to preserve Time’s corporate culture and independence.
- Before Time’s shareholders voted on the merger, Paramount made a hostile all-cash tender offer for Time shares at $175 per share, later increased to $200 per share.
- Time’s board rejected Paramount’s offer and restructured the Warner transaction from a merger into a cash-and-securities acquisition in which Time would tender for 51% of Warner at $70 per share, with a plan to acquire the rest later.
- The restructuring avoided a Time shareholder vote and increased leverage, making a Paramount acquisition of Time materially more difficult.
- Paramount and certain Time shareholders sued to enjoin Time’s Warner tender offer, alleging fiduciary breaches under Revlon and Unocal.
- The Court of Chancery denied a preliminary injunction after expedited proceedings; plaintiffs sought interlocutory review.

## Issues

1. Whether the Time–Warner transaction constituted a sale or change of control triggering Revlon duties to maximize immediate value by accepting Paramount’s higher cash offer.
2. Whether Time’s response to Paramount’s bid, including restructuring the Warner transaction, satisfied Unocal’s enhanced scrutiny for defensive measures.
3. Whether plaintiffs met the standard for a preliminary injunction based on a likelihood of success on the merits.

## Decision

- The Delaware Supreme Court affirmed the denial of a preliminary injunction and permitted Time to proceed with its tender for Warner.
- Revlon duties were not triggered because the transaction did not constitute a sale or change of control; post-transaction control would remain with a dispersed body of unaffiliated stockholders.
- Under Unocal, Time’s board reasonably perceived threats posed by Paramount’s bid, including to corporate policy, long-term strategy, and value.
- The board’s defensive response, though forceful, was reasonable in relation to the threats and was not impermissibly coercive or preclusive.

## Legal Principles

- Revlon applies when a transaction results in a sale or break-up of the company or a shift from dispersed ownership to a controlling stockholder, requiring pursuit of the best value reasonably available.
- A board may continue to pursue a long-term strategy and is not required to accept a premium offer absent a Revlon-triggering change of control.
- Under Unocal, directors must show (1) reasonable grounds for believing a threat to corporate policy and effectiveness exists, and (2) a defensive response reasonable in relation to that threat.
- In assessing threats under Unocal, a board may consider inadequate value, timing and informational effects on stockholders, and effects on corporate policy and culture, if supported by an informed, good-faith process.
- If enhanced scrutiny is satisfied, courts generally defer to directors’ decisions under business judgment principles, limiting injunctive relief absent a showing of likely fiduciary breach.

## Conclusion

The court held that Time’s pursuit of the Warner combination did not place Time “for sale” and therefore did not trigger Revlon; applying Unocal, it upheld Time’s restructuring and related defenses as a proportionate, informed response to Paramount’s hostile bid, and affirmed denial of preliminary injunctive relief.


Paramount Communications, Inc. v. Time Inc., 571 A.2d 1140 (Del. 1989)