In his essay, referenced above, author Kirby Smith considers the effects of the equal treatment clause in acquisitions of companies with dual class structures. In the charters of many such companies, there are equal treatment clauses that require that any merger consideration be distributed pro rata. The presence of such a clause may make the control person less likely to pursue a strategic transaction. The clause also might have the effect of requiring a buyer to pay more than the value ascribed to the company by the control person, since the control person effectively holds a veto over the potential strategic transaction. The author suggests two approaches to addressing the issue: first, eliminating equal treatment clauses and relying on the Delaware entire fairness framework, or second, embedding a control premium in the articles of incorporation or charter.
