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Special Merger Protections for Minority Shareholders

Ward on Iowa Limited Liability Company Law:  “In 2005 John Q. Hammons Hotels, Inc. was sold to a private company.  The minority shareholders received $24 per share for their 24% interest and John Q. himself received different consideration for his 76% stake.  Hammond’s consideration included a small stake in the buyer with a preferential buyout, a line of credit and other consideration.  The parties disagreed on whether his consideration was worth more or less than $24 per share.  The plaintiffs brought a class action alleging that Hammons and the board of directors breached their fiduciary duties by negotiating different consideration and allowing the merger to be approved through a deficient process, respectively.”

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