Posts in Appraisal

Chancery Explains When Deal Price is a Persuasive Indicator of Fair Value in an Appraisal Proceeding

In re Appraisal of Stillwater Mining Co., Consol. C.A. No. 2017-0385-JTL (Del. Ch. Aug. 21, 2019).

Recent Delaware Supreme Court decisions on appraisal proceedings have stressed the pivotal importance of the deal price in establishing fair value.  In this case, the Court of Chancery faced an appraisal for a transaction in which the company’s General Counsel expressed ongoing concerns about the CEO’s potential conflict in spearheading the sale process.  That gave rise to the question:  In measuring fair value, what weight should be accorded to the deal price when there is some “hint of self-interest” that may have compromised the market check?  More ›

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Chancery Determines Appraisal “Fair Value” Below Merger Consideration, Questions Judicial Notice of Valuation Scholarship

In re Appraisal of Jarden Corp., Consol. C.A. No. 12456-VCS (Del. Ch. July 19, 2019).

This decision presents another cautionary tale for stockholders of a target public company who consider seeking statutory appraisal instead of accepting the merger consideration. More ›

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CCLD Holds that D&O Policy’s Duty to Defend “Securities Claims” Extends to Appraisal Proceedings under 8 Del. C. § 262

CCLD Holds that D&O Policy’s Duty to Defend “Securities Claims” Extends to Appraisal Proceedings under 8 Del. C. § 262, that Pre-Judgment Interest on an Appraisal Award May be a Covered “Loss” and that a Breach of Consent-to-Defense Clause does not Bar Coverage Absent Prejudice to Insurer

Solera Holdings, Inc. v. XL Specialty Ins. Co., N18C-08-315 AML CCLD (Del. Super. Ct. Jul. 31, 2019).

The Complex Commercial Litigation Division of Delaware’s Superior Court has become a leading venue for complex insurance coverage disputes.  This decision addresses D&O insurers’ denial of coverage for over $13 million spent defending an appraisal proceeding under 8 Del. C. § 262, as well as $38.4 million in pre-judgment interest on the appraisal award.  More ›

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Court of Chancery Addresses Overlapping Appraisal and Fiduciary Duty Action

In re Xura Stockholder Litigation, C.A. No. 12608-VCS (Del. Ch. Dec. 10, 2018)

Lately, the Delaware Supreme Court has given great weight to the deal price in appraisal cases.  As a result, plaintiffs have put a greater focus on showing that the process leading to the merger makes that price unreliable, potentially because of breaches of fiduciary duty.  One strategy for recovery is to file a breach of fiduciary case after obtaining valuable discovery in the appraisal case.  This decision explains when such a fiduciary duty case can go forward notwithstanding the appraisal proceeding seeking to recover for the same loss.  More ›

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Court Of Chancery Upholds Waiver Of Appraisal

Manti Holdings LLC v. Authentrix Acquisition Co.,  C.A. 2017-0887-SG (October 1, 2018)

This decision upholds a contractual waiver of appraisal rights entered into at the time the investment was made. That is not new. However, what is important is the focus on the type of transactions that triggered the waiver, with a merger doing so but a stock sale not waiving the right to be carried along. Thus, the terms of the deal once again are critical.

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Court Of Chancery Admits Post-Signing Evidence

In re Appraisal of Jarden Corporation, C.A. 12456-VCS (September 7, 2018)

Appraisal cases often must deal with whether to admit evidence that deals with post-merger events. The argument is that those events show whether the predictions of future earnings are accurate measures of value. This decision deals with post-signing evidence but is nonetheless instructive of the Court’s general willingness to give such evidence the weight it deserves all things considered.

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Are Post-Merger Facts Ever Relevant?

Appraisal litigation is unique under Delaware law. In almost every instance you can think of, once an event provides a right to recover damages (such as a fire caused by negligence), what happens later is relevant to determining the amount of damages. For example, the actual future earnings of a business is relevant to a claim for lost profits. But, that is not always so in an appraisal case. There the valuation of the company involved is determined as of “the point just before the merger transaction ‘on the date of the merger,’” see Merion Capital v. Lender Processing Services, (Del. Ch. Dec. 16, 2016). More ›

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Court of Chancery Addresses Confidentiality in Appraisal Context and Use of Discovery to Identify New Claims

In re Appraisal of Columbia Pipeline Group, Inc., C.A. No. 12736-VCL (Del. Ch. Aug. 30, 2018)

It is common and accepted practice for parties in Court of Chancery litigation to enter into a stipulated order governing the inevitable exchange of commercially-sensitive information during the discovery process.  Those orders spell out how such information may or may not be disclosed, including in court filings, while adopting the standards and procedures reflected in the Court of Chancery rule on the topic, Rule 5.1.  More ›

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Court of Chancery Finds Deal Price, Not Pre-Merger Market Price, Is Fair Value in Appraisal

In re Appraisal of Solera Holdings Inc., C.A. No. 12080-CB (Del. Ch. July 30, 2018)  

This appraisal decision can be added to long list of decisions finding the deal price is the “best evidence” of the subject company’s fair value.  That list should continue to grow since the Delaware Supreme Court heavily endorsed applying market efficiency principles in appraisal actions twice over the past year, in Dell and DFC.  Important to Court’s finding here was an adequate deal process. More ›

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Court of Chancery Explains When Market and Deal Price Are Not Fair Value In Appraisals

Blueblade Capital Opportunities LLC v. Norcraft Cos. Inc., C.A. No. 11184-VCS (Del. Ch. July 27, 2018)

This is an important appraisal decision because it examines, post-Dell and DFC, when the market price and deal price of the stock being appraised may not represent fair value.  That might occur when, as here, there is a lack of evidence supporting the market’s efficiency for the subject corporation and the deal has process flaws.  In such a scenario, the traditional valuation methodology of a discounted cash flow analysis—a battle of the experts—is likely to control.  The deal price, however, still has value as a reality check on this analysis.  The decision also is noteworthy for the petitioner’s use of expert testimony to show the flaws in the post-announcement market check. More ›

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Court Of Chancery Holds That Dr. Pepper And Keurig Reverse Triangular Merger Does Not Trigger Appraisal Rights

City Of North Miami Beach General Employees’ Retirement Plan v. Dr. Pepper Snapple Group Inc., C.A. No. 2018-0227-AGB (Del. Ch. June 1, 2018)

In a reverse triangular merger, a parent company uses a subsidiary to acquire a target, with that subsidiary then being absorbed by the target.  That is how the Dr. Pepper and Keurig companies structured their deal.  Dr. Pepper would be the resulting parent company, with Dr. Pepper’s stockholders gaining cash but retaining their stock, and with Keurig’s stockholders gaining a controlling interest in Dr. Pepper.  Certain Dr. Pepper stockholders sued claiming that they had appraisal rights to a judicially-determined fair value in connection with the transaction under Section 262 of the DGCL, which were being violated.  More ›

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Court of Chancery Defends Aruba Networks Appraisal Decision

Verition Partners Master Fund Ltd. v. Aruba Networks Inc., C.A. No. 11448-VCL (Del. Ch. May 21, 2018)

This opinion arises out of the appraisal proceeding relating to Hewlett-Packard’s purchase of Aruba Networks. The case led to two notable opinions, so far.  More ›

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Court Of Chancery Interprets Dell In An Appraisal Case

In RE Appraisal Of AOL Inc., C.A. 11204-VCG (February 23, 2018)

This is an important case for its comments on the Dell decision of the Delaware Supreme Court. The Court declined to use the deal price as evidence of the fair value despite the favorable comments on the use of deal price in Dell. Hence, this may mean that some commentators are wrong in their views that deal price is conclusive in valuation cases in the Delaware courts. Note, however, that again the fair value determined by the Court is less than the deal price, a loss for petitioners.  More ›

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Court Of Chancery Adopts Market Price In Appraisal Valuation

Verition Partners Master Fund Ltd. V. Aruba Networks Inc., C.A. 11448-VCL (February 15, 2018)

This appraisal case adopts the target’s market price as its fair value. This confirms that the Court of Chancery may well interpret Dell and related decisions as strongly favoring market price, at least when the market is deemed efficient and unaffected by the deal. Is this then the end of appraisal arbitrage?

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Delaware Supreme Court Stresses Value Of Deal Price In Appraisal Case

Dell Inc. v. Magnetar Global Event Driven Master Fund Ltd., No. 565, 2016 (December 14, 2017)

In this much-anticipated decision, the Delaware Supreme Court stresses the importance of the deal price to the award in an appraisal case. The Court is very careful to note how much the deal price reflected a highly efficient market and a prolonged exposure of the company to competing buyers. It probably did not help the petitioners that their expert testified to a value that seemed much too big. The case was remanded to the Court of Chancery so the Dell saga will continue. Finally, the Supreme Court’s comments on how to allocate the expenses of an appraisal may also have a future impact on appraisals arbitrage.

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