What potential impact could Delaware law have on a change of control at Benihana?

According to Benihana's 2024 Franchise Disclosure Document, Delaware law, along with provisions in the company's certificate of incorporation and bylaws, may act as an anti-takeover mechanism, potentially delaying or preventing a change of control. This could occur even if a majority of stockholders are in favor of such a change. This measure could make it more difficult to remove current management and might discourage transactions that would otherwise offer stockholders a premium over the existing market price for their securities.

Specifically, Benihana's board of directors is divided into three classes, with directors serving staggered three-year terms. This arrangement means that only a minority of the board is up for election each year. This staggered board structure can prevent stockholders from replacing a majority of the board at any single annual meeting, which could entrench the existing management and discourage unsolicited stockholder proposals, even if those proposals are in the best interests of the stockholders.

Furthermore, the Benihana board has the authority to issue new series of preferred stock without needing stockholder approval. The board can authorize up to 10,000,000 shares of preferred stock, which could have superior rights compared to common stock in terms of liquidation and dividend preferences, voting rights, and other aspects. Issuing such preferred stock would reduce the rights of common stockholders without their consent and could dilute their ownership percentage if the preferred stock is convertible into common stock. This ability to issue preferred stock can also be used strategically to discourage, delay, or prevent a change in control of Benihana.