Valuation – Delaware Docket

Delaware Court of Chancery Finds Valuation of Stock Alone is Sufficient to Support Books and Records Request

Oct 20 2020

By: Joanna A. Diakos Kordalis and Serena Hamann

In Avery L. Woods Trust v. Sahara Enterprises, Inc., C.A. No. 2020-0153-JTL (Del. Ch. July 22, 2020), the Delaware Court of Chancery (the “Court”) granted an inspection of books and records to Avery L. Woods (“Woods”), the trustee of the Avery L. Woods Trust (the “Trust” ) finding that the Trust’s stock valuation and investigation of possible mismanagement reasons for inspection sufficient and proper.

Delaware Chancery Court Parses Valuation Methods in Battle of the Experts

Oct 15 2020

By: David L. Forney and Zane A. Madden

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.

Court of Chancery Applies Entire Fairness Standard to Stock Sale Approved by Interested Board of Directors

May 16 2020

By: Annette Becker and Marissa Leon

In Marion Coster v. UIP Companies, Inc. (C.A. No. 2018-0440-KSJM) the Delaware Court of Chancery (the “Court”) addressed a dispute over the control and ownership of a company following a sale of unissued stock to a company executive. The Court applied the entire fairness standard to review the stock sale transaction and held it was fair in light of a valuation report obtained by the defendants in the case and entered judgment in favor of the defendants validated the stock issuance.

WINDFALL OR FAIR? BREACH OF FIDUCIARY DUTY AND UNJUST ENRICHMENT CLAIM SURVIVES MOTION TO DISMISS

May 07 2020

By Whitney J. Smith and Mehreen Ahmed

In Gary D. Voigt v. James S. Metcalf et. al. and NCI Building Systems, Inc., C.A. No. 2018-0828-JTL (Del Ch. Feb. 10, 2020), the court denied defendants’ motion to dismiss, finding that the transaction at issue should be reviewed under the entire fairness standard and that the plaintiff, a stockholder of NCI Building Systems, Inc. (“NCI”), successfully stated claims for breach of fiduciary duty and unjust enrichment against private equity firm Clayton, Dubilier, & Rice (“CD&R”) and most of NCI’s directors in connection with a stock-for-stock merger between NCI and Ply Gem Parent, LLC (“Ply Gem”). The headline issue for the motion to dismiss was whether the plaintiff had pled facts that made it reasonably conceivable that CD&R controlled NCI despite owning less than a majority of NCI’s outstanding shares.

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.

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.

Chancery Court Limits Access to Books and Records Based on Stockholder’s Failure to State Purpose in Section 220 Demand

Apr 30 2018

By: James S. Bruce and Taylor B. Bartholomew

In KT4 Partners LLC v. Palantir Technologies, Inc., C.A. No. 2017-0177-JRS (Del. Ch. Feb. 22, 2018), in a post-trial ruling, the Delaware Court of Chancery granted a stockholder limited rights to inspect a corporation’s books and records related to the stated purpose of investigating possible wrongdoing, but the Court denied the stockholder’s request to obtain other books and records related to the purpose of valuing its shares because its initial demand did not explicitly state a valuation purpose.

CHANCERY COURT DECLINES TO DISMISS FIDUCIARY CLAIMS ARISING FROM A SELF-TENDER OFFER

Sep 14 2017

By Lisa Stark and Dean Brazier

In Buttonwood Tree Value Partners L.P., et al. v. R.L. Polk & Co., Inc., et al., C.A. No. 9250-VCG (Del. Ch. July 24, 2017), the Delaware Chancery Court denied, in part, a motion to dismiss claims for breach of the fiduciary duty of loyalty brought by minority stockholders in R. L. Polk and Co., Inc. (“Polk”) against the directors of Polk and members of the Polk family, who controlled Polk, in connection with a self-tender offer. In this case, the Court held that it was reasonably conceivable that the Polk directors who were affiliated with the Polk family deliberately caused Polk to conduct a self-tender offer at a low price to enable Polk family insiders to maximize their proceeds from a future sale of Polk.

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