Delaware Extends “Cleansing Effect” of Stockholder Merger Vote to Tender Offer Acquisitions

In its recent In re Volcano Corporation Stockholder Litigation decision, the Delaware Court of Chancery extended the “cleansing effect” of the majority vote of fully informed, uncoerced, and disinterested stockholders in favor of a merger not subject to the entire fairness standard—as reinforced by the Delaware Supreme Court last fall in Corwin v. KKR Financial Holdings LLC (discussed in our prior alert)—to the acceptance by a majority of such stockholders of a first-step tender offer pursuant to Delaware General Corporation Law Section 251(h) (“DGCL 251(h)”), which governs certain two-step mergers. Unless overturned or modified on appeal, Volcano establishes that, with the requisite stockholder approval, Delaware courts will afford both one- and two-step mergers (the latter, if conducted pursuant to DGCL 251(h)) the “irrebuttable” protection of the business judgment rule.