Delaware Business Litigation Report

Court of Chancery Determines Appraisal Value And Compounds Interest Quarterly

In re United States Cellular Operating Co., C.A. No. 18696-NC, 2005 WL 43994 (Del. Ch. Jan. 06, 2005). This is a share appraisal action involving cellular phone corporations under 8 Del. C. §262. This consolidated statutory appraisal action pursuant to 8 Del. C. §262 involved two private companies (Janesville and Sheboygan) in the cellular telephone business. The court rejected the acquiring entity's merger valuations based on its DCF and comparative transactions ("CT") methods presenting per share values of $43.85 (Janesville) and $21.45 (Sheboygan). The court also rejected plaintiff's valuation based on an equal weighting of its DCF and CT analysis ($72.89 and $41.39). The court then determined the values of the merging entities as "going concerns," utilizing the DCF and CT methodologies, rejecting any synergistic values. The court assigned a 70:30 weighting for its DCF and CT methodologies, arriving at values of $54.00 (Janesville) and $30.13 (Sheboygan). The court awarded compound interest on a quarterly basis under 8 Del. C. §262(h). The court rejected plaintiff's "cost of equity" rate of interest as not consistent with the court's recent decisions requiring an objective standard that appropriately weighs the prudent investor standard with the actual cost of borrowing. Authored by: Raj Srivatsan 302-888 6831 rsrivatsan@morrisjames.com Share