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Court of Chancery Decides Atypical Appraisal Proceeding in Which Parties had Stipulated to All But One Asset of Merging Company

Posted In Appraisal, M&A
Finkelstein v. Liberty Digital, Inc., 2005 WL 1074364 (Del. Ch. April 25, 2005). This appraisal case involved the fair value of shares of a company, Liberty Digital, Inc., that was merged with an acquisition subsidiary of Liberty Media Corporation and survived the merger as a wholly owned subsidiary of Liberty Media. What was atypical about this appraisal case was that the parties were able to stipulate to the value of all but one of Liberty Digital's assets. In their stipulation, the petitioners--who collectively owned 1,329,600 shares of Liberty Digital stock--and the respondent, Liberty Digital, stipulated that the fair value of Liberty Digital's assets other than an "Access Agreement" with AT&T was $497,627,000 or $2.15 per Liberty Digital share. Over the years since its creation, Liberty Digital has owned, in addition to the Access Agreement, a number of other assets including interests in several private and public companies. In contrast to a more typical appraisal proceeding valuing an entire company, the stipulation left for resolution at trial the more narrow question of "whether and to what extent the fair value of shares of [Liberty Digital] common stock should be increased as a result of any value arising out of or attributable to the AT&T Access Agreement." The Access Agreement was a vague contract right, which, by its terms, was a binding "agreement to agree." The court concluded that this right was only worth $135 million and that Liberty Digital's stock was worth $632 million, or $2.74 per share. Petitioners were awarded $133 million plus pre-judgment interest. Share
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