We develop a contracting theory of entire fairness and apply it to divestitures of majority blocks held by controlling parent firms, including affiliate purchases of such blocks, transactions subject to entire fairness due to the potential for self-dealing. A parent can also divest its stake via business judgment rule methods. Theory and evidence indicate that under entire fairness affiliate purchases occur only when both parent and affiliate hold positive private information; premiums paid are equal to those paid in arm’s length, third party deals. Affiliates gain value at block purchases but lose value in spin-offs and secondary stock issues.