Appraisal Rights – Page 2 – Delaware Docket

Chancery Court Cites Flawed Process in its Resort to Traditional Valuation Methodology and Reliance on All Relevant Factors in a Recent Appraisal Action

Sep 06 2018

The Delaware Court of Chancery determined that a flawed deal process kept the merger price from being a reliable indication of value in the Blueblade Capital Opportunities LLC and Blueblade Capital Opportunities CI LLC (collectively, “Blueblade”) v. Norcraft Companies, Inc. (“Norcraft”) (C.A. No. 11184-VCS (Del. Ch. July 27, 2018)), appraisal action.

Chancery Court Clarifies “Constituent Corporation”

Jul 13 2018

By: Stephan H. Coonrod and Stephanie S. Liu

In City of North Miami Beach General Employees’ Retirement Plan, et al. v. Dr Pepper Snapple Group, Inc., et al., (C.A. No. 2018-0227-AGB (Del. Ch. June 1, 2018)), the Court of Chancery held that the term “constituent corporation” as used in Section 262 of the Delaware General Corporation Law means only an entity that actually is being merged or combined with another entity in a merger or consolidation and does not include a parent of such entities. Thus, the Court ruled that the Dr Pepper stockholder plaintiffs are not entitled to appraisal rights because Dr Pepper is not a constituent corporation, but rather the parent of one of two corporations to be merged in connection with the proposed transaction.

CHANCERY COURT SETS FAIR VALUE IN APPRAISAL ACTION BELOW THE VALUATIONS SUGGESTED BY THE PARTIES

Jun 29 2018

By: Scott Waxman and Benjamin Kendall

In Verition Partners Master Fund Ltd. v. Aruba Networks, Inc., C.A. No. 11448-VCL (Del. Ch. May 21, 2018), the Delaware Court of Chancery denied a motion for reargument of its earlier decision setting the appraisal value of the shares of Aruba Networks, Inc. (“Aruba” or the “Company”) at the time of its acquisition by Hewlett-Packard Company (“HP”). Although the merger agreement offered $24.67 per share of the Company, and the Company ultimately suggested that the fair value of the Company’s shares was $19.75, the Court of Chancery set the fair value of the Company’s shares at $17.13. In denying the motion for reargument, the Court of Chancery reiterated its position that the trial court must independently determine the fair value of the shares in an appraisal proceeding and that the market price of a publicly traded firm can itself be an accurate measurement of fair value.

Chancery Court Holds That Certificate of Incorporation Provision Provides Preferred Stockholders Voting Right, Not Entitlement to Liquidation Preference

Jul 11 2017

By Holly Hatfield and Priya Chadha

In In re Appraisal of GoodCents Holdings, Inc., C.A. No. 11723-VCMR, Vice-Chancellor Montgomery-Reeves held that, following a merger, a provision in the target company’s certificate of incorporation only provided preferred stockholders a voting right, not an entitlement to a liquidation preference.

Chancery Court Dismisses Minority Stockholders’ Action Seeking Quasi-Appraisal in United Capital Corp. Buyout

Jan 19 2017

By: Shoshannah Katz and Andrew Gahan

In In re United Capital Corp., Stockholders Litigation, C.A. No. 11619-VCMR (Del. Ch. Jan. 4, 2017), the Delaware Court of Chancery dismissed a suit brought by plaintiff minority stockholders (“Plaintiff”) that sought a quasi-appraisal to remedy alleged breaches of the duty of disclosure in connection with the acquisition of United Capital Corp. (“United Capital” or “Company”) via short-form merger. The Court concluded that Plaintiff had not adequately alleged that any omitted information was material to the decision to seek appraisal and that the duty of disclosure was not violated.

Delaware Chancery Court Grants Fee and Expense Award in Dell Appraisal Case

Dec 12 2016

By: Naomi R. Ogan and Stephanie S. Liu

In In Re Appraisal of Dell, C.A. No. 9322-VCL (Del. Ch. October 17, 2016), previously discussed here, the law firm representing Dell Inc.’s stockholders in appraisal proceedings challenging the valuation of shares in connection with Dell’s 2013 “go-private” merger was awarded approximately $4 million in advanced expenses and $4 million in attorneys’ fees. The Delaware Court of Chancery held that the amounts were reasonable and that the expenses and fees should be allocated pro rata among the appraisal class. Since this was a case where counsel had incurred significant out-of-pocket expenses, the court held that the approach that best balanced the interests of the attorneys and the class was to deduct reimbursable expenses first, then award a fee based on the net benefit achieved.

Chancery Court Determines the Appropriate Valuation Method for Use in Connection with an Appraisal Action Involving the Greatest Divergence among Valuations the Court Has Seen to Date

Sep 15 2016

By: David L. Forney and David Valenti

In determining the fair value of stock of a privately held corporation at the time of a cash-out merger in connection with an appraisal action by minority stockholders—where one of the minority stockholders’ experts proffered a fair value greater than eight times that provided by the company’s expert—the Delaware Court of Chancery found that the valuation method used by the company’s expert was unreliable. The Court held that in this case the discounted cash flow analysis is the most reliable indicator of fair value because (1) the company’s stock is not publicly traded, (2) historical sales of stock are not reliable indicators of fair value, and (3) no comparable company valuation exists.

In an Appraisal Action, Chancery Court Uses Its “Significant Discretion” to Determine that Stock Sold Was Undervalued by Approximately 7%

Aug 08 2016

By Christopher Tillson and B. Ashby Hardesty, Jr.

On July 8, 2016, Chancellor Bouchard issued a memorandum opinion in In re Appraisal of DFC Global Corp., C.A. No. 10107-CB (Del. Ch. July 8, 2016), finding that shares held by former stockholders of DFC Global Corporation (“DFC”) sold to Lone Star Fund VIII (U.S.), L.P. (“Lone Star”), a private equity buyer, for $9.50 per share were undervalued. Chancellor Bouchard determined this through an examination of multiple valuation methods — comparable company and transaction analyses, discounted cash flow analyses, and the transaction price — and ultimately concluded that an equal blend of the three was the most reliable determinate of the shares’ fair value. In doing so, Chancellor Bouchard calculated that the fair market value of the DFC shares was $10.21 per share.

Delaware Chancery Court Expands on Dissenter Requirement under DGCL Section 262

Jun 21 2016

By: Naomi R. Ogan and Stephanie S. Liu

In In re Appraisal of Dell Inc., C.A. No. 9322-VCL, (Del. Ch. May 11, 2016), the Delaware Court of Chancery held that the shares held by fourteen mutual funds through a sponsor or institutions that relied on such parties to direct the voting of their shares (collectively, the “Petitioners”) did not qualify for appraisal in connection with Dell Inc.’s go-private merger because the dissenter requirement under the Delaware General Corporation Law (“DGCL”) was not met as the shares were voted in favor of the merger.

Chancery Court Holds That Merger Price That Resulted from a Thorough and Vigorous Sale Process Is the Best Indication of Fair Value in Appraisal Proceeding

Oct 26 2015

By Susan Apel and Calvin Kennedy

Merion Capital LP and Merion Capital II LP v. BMC Software, Inc. concerns an appraisal proceeding under Section 262 of the Delaware General Corporation Law in which the Chancery Court found that the deal price generated by the market through a thorough and vigorous sales process was the best indication of fair value.

On September 13, 2013, the petitioners, Merion Capital LP and Merion Capital II LP (together, “Merion”), filed a Verified Petition for Appraisal of Stock pursuant to 8 Del. C. § 262 (the “Appraisal Statute”) against respondent, BMC Software, Inc. (“BMC”). The action stemmed from a merger pursuant to which BMC’s stockholders were cashed out at a price of $46.25 per share (the “Merger”). Merion (who the court noted are “arbitrageurs who bought, not into an ongoing concern, but instead into this lawsuit”) owned 7,629,100 shares of BMC common stock. The Court presided over a four day trial in this matter, at which Merion presented expert testimony claiming that the stock was undervalued and BMC presented expert testimony claiming that the Merger price actually exceeded fair value.

Catagory:Appraisal Rights