Ivanhoe Partners v. Newmont Mining Corporation

Delaware Court of Chancery · 1987 · Corporations

533 A.2d 585 (1987)

Updated August 22, 2026

Corporationstakeover defensesfiduciary dutiesstandstill agreementsstreet sweepsstreet sweepstandstill agreementUnocal

Facts

Ivanhoe, a hostile tender offeror, owned about 10% of Newmont and launched a partial cash tender offer designed to bring its holdings to 51%. Gold Fields, Newmont's largest stockholder, already owned 26.2% and, after Newmont and Gold Fields entered into a new standstill agreement, bought an additional 23.7% of Newmont stock in a rapid 'street sweep,' bringing its ownership to 49.7%. Newmont also declared a $33 per share dividend that would help finance Gold Fields' purchases and was paid to all shareholders, including Ivanhoe. The challenged September 20 standstill agreement capped Gold Fields at 49.9%, required it to vote for Newmont's director slate, and imposed transfer restrictions that plaintiffs claimed would entrench the board and make Newmont takeover-proof.

Issue

Whether Newmont's dividend, Gold Fields' street sweep, and the September 20 standstill agreement violated Delaware fiduciary duties by entrenching the board, triggering Revlon sale duties, using inside information, coercing shareholders, or constituting unreasonable defensive measures under Unocal. If any violation likely existed, the court also had to decide whether preliminary injunctive relief unwinding the street sweep was appropriate.

Rule

Under Unocal, directors resisting a takeover must show reasonable grounds, based on good faith and reasonable investigation, for believing a danger to corporate policy and effectiveness exists, and must show their defensive response was reasonable in relation to the threat posed. Revlon duties arise only when circumstances make it inevitable that the company will be sold. A lawful dividend is protected by the business judgment rule absent self-dealing, fraud, gross abuse of discretion, or waste, and shareholder coercion requires wrongful inducement unrelated to the economic merits of the sale.

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

Summit Ridge Metals, a Delaware corporation based in Denver, faces a hostile partial tender offer from Red Clay Holdings, which already owns 11% of Summit Ridge and seeks to reach 51%. Summit Ridge's board, made up mostly of outside directors, meets repeatedly with independent legal and financial advisors, concludes the offer is underpriced and coercive because it offers no firm commitment to acquire the remaining shares on the same terms, and also learns that a 27% stockholder could quickly terminate an old standstill and seek control.

If shareholders challenge the board's defensive response, which is the strongest argument that the board satisfied the first prong of enhanced scrutiny?

Explanation. Under the majority opinion, directors resisting a takeover must first show reasonable grounds for believing a danger to corporate policy and effectiveness exists, supported by good faith and reasonable investigation. A board may reasonably perceive threats not only from a hostile bidder using a coercive two-tier structure, but also from a large stockholder that could terminate restraints and pursue control. The rule does not require automatic deference, proof of an actual completed second-step merger, or that the large stockholder already hold majority control.