Court of Chancery Finds Deal Price, Not Pre-Merger Market Price, Is Fair Value in Appraisal
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.
The decision has another point worth noting—the Court’s discussion of the pre-merger market price as evidence of fair value, a point of debate since the Court of Chancery’s Aruba decisions. First, the Court rejected respondent’s argument that the pre-merger market price was the best evidence of fair value in this case. But, much of that result flowed from the respondent’s failure to make its argument earlier than post-trial. Second, and perhaps more importantly, the Court seemed prepared to accept that the market price is not the best evidence of fair value when it does not contain the value of control reflected in the deal price. That extra value, according to the Court, is part of what the dissenting stockholders are entitled to receive under Delaware’s appraisal statute.