UNREPORTED CASE: IN RE TRANS WORLD AIRLINES, INC. SHAREHOLDERS LITIGATION, No. 9844 (Consolidated). Skip over navigation
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Copyright Delaware Law School of Widener University, Inc. 1989

Delaware Journal of Corporate Law

UNREPORTED CASE: IN RE TRANS WORLD AIRLINES, INC. SHAREHOLDERS LITIGATION, No. 9844 (Consolidated).

Court of Chancery of the State of Delaware, New Castle, October 21, 1988

SPRING, 1989

14 Del. J. Corp. L. 870

Author

ALLEN, Chancellor

Excerpt

On September 7, 1988, the minority shareholders of Trans World Airlines, Inc. ("TWA"), a Delaware corporation, voted by an overwhelming majority to approve a proposed merger transaction by which entities controlled by TWA's dominating shareholder, Carl C. Icahn, would acquire all of the voting stock of the Company (excepting 10% to be owned by an Employee Stock Ownership Plan). In the proposed merger, each share owned by the public shareholders would be converted into the right to receive $ 20 per share in cash and $ 30 in principal amount of a new 12% subordinated debenture due in 2008. The vote was pursuant to a commitment from Mr. Icahn, who controls 77% of TWA's common stock, to vote his shares in the same proportion as the public shares were voted. Over 96% of the public shares voting approved the transaction.

These consolidated class action cases seek to enjoin the effectuation of this going private transaction. Plaintiffs offer several theories to justify this strong medicine. Those theories may be divided into two classes: substantive fiduciary duty theories and adequacy of disclosure theories. As to the claim of substantive unfairness, plaintiffs claim, in summary, that (1) the price proposed is unfairly low; (2) that the transaction was timed to mask the upward trend of TWA's earnings; and (3) that a special two member committee of the TWA board that purported to represent the interests of the public shareholders in the negotiation process with Mr. Icahn, (a) misunderstood its responsibility ...
 
 
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