U.C. Davis Law Review
Ted J. Fiflis, Of Lollipops and Law -- A Proposal for a National Policy Concerning Tender Offer Defenses, 19 U.C. Davis L. Rev. 303 (1986), available at https://scholar.law.colorado.edu/faculty-articles/1012.
Early last year, Mesa Petroleum Company made a tender offer for shares of Unocal Corporation in an effort to take over Unocal. Unocal responded by using the "lollipop" defense, which is a discriminatory issuer self-tender offer. Unocal's use of this defense resulted in huge economic losses to many of Unocal's small shareholders who were not knowledgeable about the ramifications of their participation or non-participation in the tender offer. The Delaware Supreme Court upheld Unocal's use of this defense as an appropriate exercise of business judgment. A federal district court in California refused to strike down the lollipop under federal law because it was exclusively a state law question. In this Article, Professor Fiflis argues that broad federal legislation is needed to limit possible abuses of the lollipop and similar tender offer defenses.
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