Fair Value – Delaware Docket

Delaware Chancery Court Parses Valuation Methods in Battle of the Experts

Oct 15 2020

In William Richard Kruse (the “stockholder”), v. Synapse Wireless, Inc. (the “Company”), C.A. No. 12392-VCS (Del. Ch. July 14, 2020), the Delaware Court of Chancery (the “Court”) held that, after its review of the evidence as factfinder, the Company had carried its burden of proving a reliable appraisal of its fair value related to its 2016 merger transaction. As is typical in appraisal disputes, each party’s expert presented wildly different valuations. In this lengthy case, the Court nevertheless analyzed each proposed valuation model on its own merits and did not engage in compromise jurisprudence in order to achieve a sense of fairness for one party. In coming to its conclusion, the Court adopted the Company’s discounted cash flow valuation method, eschewing all other methods as unreliable in this case. The Court’s value was almost half of the merger transaction value upon which the stockholder exercised its appraisal rights.

IN A SECTION 262 APPRAISAL RIGHTS PROCEEDING, CHANCERY COURT ACCEPTS A MODIFIED VERSION OF PETITIONERS’ VALUATION OF A MERGING COMPANY’S STOCK

Apr 01 2020

By: Christopher Bellavia and Adam Heyd

In Manichaean Capital, LLC, et al. v. SourceHOV Holdings, Inc., C.A. No. 2017-0673-JRS (Del. Ch. January 30, 2019), certain minority stockholders of a merging company filed a petition with the Delaware Court of Chancery (the “Court”) to exercise their appraisal rights under Section 262 of the Delaware General Corporate Law (“Section 262”). After reviewing competing valuations prepared by experts of the Company and the minority stockholders respectively, the Court adopted a modified version of the minority stockholders’ expert valuation. In doing so, the Court reiterated its significant discretion to discharge its independent obligation to determine fair market value and instead select one of the parties’ valuation models as a guide.

Court of Chancery Finds Deal Price Exceeded Fair Value, but Company Nonetheless Not Entitled to Refund for Prepayment of Deal Price to Dissenting Stockholders

Mar 31 2020

By: Eric Freedman and Serena Hamann

In a memorandum opinion in the case of In re Appraisal of Panera Bread Company, C.A. No. 2017-0593-MTZ (Del. Ch. Jan. 31, 2020), the Delaware Court of Chancery ruled that deal price, minus the value of synergies, was the correct metric to value the stock of Panera Bread Company (“Panera”), because the process that yielded the deal price bore sufficient objective indicia of reliability. The Court found that under this metric, the dissenting stockholders received more than fair value for each share of Panera stock but that nonetheless, because Panera prepaid the entire deal price to dissenting stockholders without deducting any value for synergies, and did not negotiate a clawback, Panera had no right to a refund under the appraisal statute, Delaware General Corporation Law (“DGCL”) § 262.

Delaware Court of Chancery Holds Deal Price Generated Through Reliable Sales Process Was Fair Value

Nov 08 2019

By: Shoshannah D. Katz and Serena M. Hamann

In the statutory appraisal proceeding, In re Appraisal of Columbia Pipeline Group, Inc., Cons. C.A. No. 12736-VCL (Del. Ch. August 12, 2019), the Delaware Court of Chancery determined that the fair value of Columbia Pipeline Group, Inc. (“Columbia” or the “Company”) common stock at the effective date of acquisition by TransCanada Corporation (“TransCanada”) was the deal price of $25.50 per share, not the $32.47 per share price proposed by the petitioners. The petitioners argued that the Court should determine fair value using the discounted cash flow method (“DCF”), while TransCanada proposed use of the deal price minus synergies and Columbia’s unaffected trading price as valuation indicators. The Court ruled the sale process in this case was sufficiently reliable to make the deal price a persuasive indicator of fair value.

rejecting a suit seeking a 43.9% higher payout, the delaware chancery court declared that the $18 per share price paid for stillwater was the fair value.

Oct 25 2019

By Scott E. Waxman and Pouya Ahmadi

In In Re: Appraisal of Stillwater Mining Company, Consol. C.A. No. 2017-0385-JTL (Del. Ch. Aug 21, 2019), the Delaware Court of Chancery (the “Court”) held that the fair value of Stillwater Mining Company (“Stillwater”) at the time of its acquisition through a reverse triangular merger with Sibanye Gold Limited (“Sibanye”) was $18 per share, equal to the merger consideration.

CHANCERY COURT SETS FAIR VALUE IN APPRAISAL ACTION AT DEAL PRICE LESS SYNERGIES

Sep 04 2018

By: Annette Becker and Caitlin Velasco

In In re Appraisal of Solera Holdings, Inc., C.A. No. 12080-CB (Del. Ch. July 30, 2018), the Delaware Court of Chancery, applying an adjusted deal price analysis in a statutory appraisal proceeding, determined that the fair value of the stock of Solera Holdings, Inc. (“Solera” or the “Company”) at the time of its March 2016 going-private merger transaction was $53.95 per share–the deal price less estimated synergies. The Court reached this conclusion after thoroughly examining and ultimately rejecting the use of (a) the discounted cash flow (“DCF”) analysis, proposed by seven investment funds that were former stockholders of Solera (the “Petitioners”) and the (b) the unaffected market price analysis, proposed by Solera in supplemental briefing in response to the use of such analysis in Verition Partners Master Fund Ltd. v. Aruba Networks, Inc., C.A. No. 11448-VCL (Del. Ch. May 21, 2018). Read More

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.

Directors’ Failure to Consider Speculative Projections in Recommending Tender Offer to Stockholders Insufficient to Plead a Claim for Breach of the Duty of Loyalty Based on Bad Faith

Jun 22 2016

By: Michelle McCreer y Repp and Benjamin Ken dall

In In re Chelsea Therapeutics International Ltd. Stockholders Litigation, Consol. C.A. No. 9640-VCG (Del. Ch. May 20, 2016), the Delaware Chancery Court held that Plaintiffs, who alleged bad faith on the part of corporate directors based on a failure to adequately take into account speculative financial projections in evaluating the adequateness of an acquisition offer, had failed to state a claim on which relief could be granted.

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