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Professors Brudney and Chirelstein urge a new approach to judicial
supervision of mergers between parent and subsidiary corporations.
They argue that a fair merger requires that gains generated
by the combination should be shared by the two corporations rather
than wholly absorbed by either, and they posit a sharing formula to
provide fair treatment to all parties to the merger. Rather than attempting
to intuit or deduce the result of an arm's-length bargain
that does not and cannot exist in the parent-subsidiary context, the
authors emphasize the joint obligation of management to the public
stockholders of both companies. The sharing formula for mergers
may be used to determine the fairness of other decisions made by
the parent during the period of affiliation. Finally, the authors suggest
a somewhat different sharing formula for mergers which are the
contemplated second step following an acquisition of control.

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merger, gain sharing, corporation