On October 14, 2011, Chancellor Strine of the Court of Chancery of the State of Delaware issued a decision in In re Southern Peru Copper Corp. Shareholder Derivative Litig., C.A. No. 961-CS. In the 105-page decision, Chancellor Strine ultimately found that the controlling stockholder defendants had breached their fiduciary duty of loyalty and awarded damages of over $1.2 billion, which may be paid by the controlling stockholder by returning some of the stock consideration received from the controlled company in the transaction. The decision provides important guidance for companies engaging in M&A transactions with their controlling stockholders.

In 2004, Southern Peru Copper Corporation, an NYSE-listed mining company, received a proposal from its majority stockholder, Grupo Mexico, S.A.B. de C.V. Under the proposal, Southern Peru would acquire Grupo Mexico’s 99.15% interest in Minera Mexico, S.A. de C.V., a non-publicly traded Mexican mining company, for $3.1 billion in Southern Peru stock. Because of Grupo Mexico’s self-interest in the transaction, Southern Peru formed a Special Committee of disinterested directors to consider the transaction. The Special Committee retained its own financial and legal advisors.

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