Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985)
Unocal Corp. v.
Whether the defensive measures taken by Unocal's board, specifically the exclusionary self-tender offer, were permissible under Delaware law.
The court established the 'Unocal Test' to evaluate defensive measures: (1) Boards must show that they had reasonable grounds for believing a threat to corporate policy and effectiveness existed; (2) The response must be reasonable in relation to the threat posed.
The Delaware Supreme Court held that Unocal's defensive measures were permissible, affirming the board's decision under the newly articulated test. It found that the board reasonably perceived Mesa's offer as a threat and responded proportionally.
Unocal v. Mesa is critical for understanding the legal landscape around corporate takeovers. It cemented directors' ability to adopt defensive measures, provided they meet specific criteria of having a reasonable threat perception and proportional action. This case underscores the role of board discretion within the fiduciary duty framework and set a precedent heavily influencing future rulings and corporate defensive strategies.