enhanced scrutiny test

Paramount Communications Inc. is a Delaware corporation with principal offices in New York City whose outstanding common stock trades on the New York Stock Exchange and whose businesses include motion picture and television studios, book publishing, professional sports teams, and amusement parks. Viacom Inc. is a Delaware corporation controlled by Sumner M. Redstone through National Amusements Inc., which owns approximately 85.2 percent of Viacom's voting Class A stock. QVC Network Inc. is a Delaware corporation headquartered in West Chester, Pennsylvania, whose chairman and chief executive officer is Barry Diller and whose large stockholders include Liberty Media Corporation, Comcast Corporation, Advance Publications, and Cox Enterprises. Negotiations between Paramount and Viacom began in earnest in early September 1993 after earlier discussions dating to April 1993. On September 12, 1993, the Paramount board unanimously approved an original merger agreement under which each Paramount share would be converted into 0.10 shares of Viacom Class A voting stock, 0.90 shares of Viacom Class B nonvoting stock, and $9.10 cash; the board also approved amendments to Paramount's poison pill rights agreement, a no-shop provision, a $100 million termination fee, and a stock option agreement granting Viacom the right to purchase 19.9 percent of Paramount's outstanding shares at $69.14 per share with a note feature and put feature. On September 20, 1993, QVC proposed a merger at approximately $80 per share. On October 21, 1993, QVC publicly announced an $80 cash tender offer for 51 percent of Paramount's shares with a second-step merger exchanging each remaining share for 1.42857 shares of QVC common stock, conditioned on invalidation of the stock option agreement. On October 24, 1993, Paramount and Viacom executed an amended merger agreement that increased the consideration but retained the defensive measures without modification. Viacom raised its offer to $85 per share on November 6, 1993, and QVC responded on November 12 by raising its offer to $90 per share. At a November 15 board meeting the Paramount directors determined that the QVC offer was not in the best interests of stockholders, citing the no-shop provision and perceived uncertainties in QVC's financing and conditions. QVC and certain Paramount stockholders filed consolidated actions in the Court of Chancery seeking preliminary and permanent injunctive relief. On November 24, 1993, the Court of Chancery granted a preliminary injunction enjoining Paramount from facilitating the Viacom tender offer or exercising the stock option agreement. The Supreme Court of Delaware accepted the expedited interlocutory appeal, affirmed the injunction by order dated December 9, 1993, and issued its full opinion on February 4, 1994.

Macmillan, Inc. is a publishing, educational and informational services company with approximately 27,870,000 common shares traded on the New York Stock Exchange. In May 1987 its chairman and CEO Edward P. Evans and president and COO William F. Reilly began exploring defensive measures including a restructuring that would give management majority control of a restructured entity through restricted shares, options and an ESOP whose trustee they would control. The board approved related transactions on June 11, 1987, including golden parachute agreements for Evans and Reilly and a poison pill exempting the ESOP. The Robert M. Bass Group acquired 7.5 percent of Macmillan stock and made an initial $64 per share offer in May 1988. After the board rejected that offer and approved a management restructuring valued at $64.15 per share, Bass raised its bid to $73 per share. On July 14, 1988 the Court of Chancery preliminarily enjoined the restructuring in Macmillan I. Hours later Evans and Reilly authorized investment advisors to explore a sale of the company and began discussions with KKR for a management-sponsored leveraged buyout. On July 20, 1988 Robert Maxwell proposed an $80 all-cash merger and later made an $80 per share tender offer conditioned on receiving the same non-public information previously given to KKR. Maxwell increased its bid to $84, then $86.60, and then $89 per share. KKR submitted competing blended bids of $85, $89.50 and finally $90.05 per share. Throughout the process Evans and Reilly met repeatedly with KKR, provided KKR detailed due diligence information weeks before Maxwell received equivalent data, and on September 26 Evans telephoned KKR to disclose the price and form of Maxwell's $89 bid. On September 27, 1988 the Macmillan board approved a merger agreement with KKR that included a lockup option to purchase seven subsidiaries for $865 million, a $29.3 million breakup fee, and a no-shop clause. The next day Maxwell raised its cash offer to $90.25 per share conditioned on invalidation of the lockup. On October 4 the board rejected the new Maxwell bid. After a hearing the Court of Chancery on October 17, 1988 denied Maxwell's motion to enjoin the lockup, breakup fees and expenses, finding that KKR had been favored but that Maxwell had not been prevented from submitting a higher bid. Maxwell appealed. The Supreme Court of Delaware accepted the interlocutory appeal and on November 2, 1988 announced its decision reversing the denial of injunctive relief, with the full opinion issued May 3, 1989.