What is the decision as to each purchase

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Reference no: EM131389472

Zenith Steel Company operates a prosperous business. The board of directors voted to spend $20 million of the company's surplus funds to purchase a majority of the stock of two other companies-Green Insurance Company and Blue Trust Company. Green Insurance Company is a thriving business whose stock is an excellent investment at the price at which it will be sold to Zenith Steel Company.

The principal reasons for Zenith's purchase of Green Insurance stock are to invest surplus funds and to diversify its business. Blue Trust Company owns a controlling interest in Zenith Steel Company. The Blue Trust Company is subject to special governmental controls. The main purpose for Zenith's purchase of Blue Trust Company stock is to enable the present management and directors of Zenith Steel Company to continue their management of the company.

Jones, a minority shareholder in Zenith Steel Company, brings an appropriate action to enjoin the purchase by Zenith Steel Company of the stock of either Green Insurance Company or of Blue Trust Company. What is the decision as to each purchase?

Reference no: EM131389472

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