In re Del Monte Foods Company S'holders Litig.

Delaware Court of Chancery · 2011 · Corporations

25 A.3d 813 (Del. Ch. 2011)

Updated August 22, 2026

CorporationsMergers and acquisitionsFiduciary dutiesPreliminary injunctionsRevlonenhanced scrutinyboard oversightfinancial advisor conflict

Facts

Del Monte agreed to be acquired by a KKR-led buyer group for $19 per share. Discovery showed that Barclays, Del Monte's financial advisor, secretly sought buy-side financing fees, pitched Del Monte to private equity firms, paired Vestar with KKR without authorization despite confidentiality restrictions, concealed that pairing from the board, and later obtained permission to provide buy-side financing while price negotiations were still ongoing. The board allowed KKR to add Vestar and permitted Barclays to finance the deal without meaningful consideration of the competitive and conflict implications. Barclays then also ran the go-shop despite its financial interest in closing a KKR deal.

Issue

Whether plaintiffs showed a reasonable probability that Del Monte's directors breached their fiduciary duties under enhanced scrutiny by failing to oversee a conflicted financial advisor during the sale process, and that KKR knowingly aided and abetted that breach. Also, whether those showings justified preliminary injunctive relief delaying the merger vote and suspending enforcement of deal protections.

Rule

In a sale-of-control transaction subject to enhanced scrutiny, directors must show they acted with proper motives to secure the best value reasonably available and that their actions were reasonable in relation to that objective, including use of a reasonable decision-making process and reasonable information. A board may be found to have acted unreasonably when a conflicted advisor taints the process and the board fails to provide active, informed oversight. A bidder may be liable for aiding and abetting if it knowingly participates in the fiduciary breach, such as by exploiting or helping create conflicts rather than merely negotiating at arm's length.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

The board of Lakeview Packaging, a Delaware corporation based in Cleveland, decides to sell the company after receiving interest from private equity firms. The directors are disinterested and genuinely want the highest price, but they allow their financial advisor to control bidder contacts and price talks while failing to monitor whether the advisor has undisclosed incentives affecting the process.

Under enhanced scrutiny, which is the strongest assessment of the board’s conduct?

Explanation. Enhanced scrutiny has both subjective and objective components. Directors must show they sought the best value reasonably available and that their actions were reasonable in relation to that goal, including a reasonable decision-making process and reliance on a reasonable body of information. Good faith motives do not alone satisfy the standard if the process was inadequately supervised or tainted. (Derived from In re Del Monte Foods Company S'holders Litig. (2011).)