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Appraisal Rights Litigation Blog

More Academic Commentary on the Role of Merger Price in Appraisal

Posted in Award Premium, Merger Price, Supreme Court

Professor Guhan Subramanian of the Harvard Business School, who was one of the Dell stockholders’ experts in the Dell appraisal case focused on the M&A deal process, has developed an ostensive “middle ground” between the competing approaches advanced by the respective amicus briefs filed by some two dozen law and economics professors in the DFC Global appeal.

In his February 6, 2017 essay, “Using the Deal Price for Determining ‘Fair Value’ in Appraisal Proceedings,” Professor Subramanian has proposed that courts adopt a presumption that the merger price represents fair value in an appraisal proceeding where the deal process involved “an adequate market canvass, meaningful price discovery, and an arms-length negotiation.”  And where the deal process lacks these features, he believes that deal price should receive no weight whatsoever.  His suggested “synthesizing principle” is a response to what he believes to be an increase in perceived appraisal risk since the Dell appraisal ruling in May 2016.

Delaware Supreme Court Accepts Amicus Brief of Law & Economics Professors Resisting Merger Price Rule

Posted in Award Premium, Merger Price, Supreme Court

Further to our posts about the DFC Global appeal, today the Delaware Supreme Court granted the February 3 motion by the Law & Economics Professors arguing against the adoption of a presumption requiring chancellors to defer to merger price in all M&A deals resulting from an apparently robust auction process.  The Supreme Court is now prepared to consider the competing amici briefs filed by both groups of academics who are respectively supporting the opposing parties in the case; in an earlier post today we shared this summary and assessment of the arguments in those competing amici briefs.

DFC Global Appeal Sets Stage for “Intellectual Cage Match”

Posted in Award Premium, Merger Price, Supreme Court

Further to our recent post about the newest amicus brief offered up to the Delaware Supreme Court — arguing against the adoption of a merger price rule in appraisal cases — the Business Law Prof Blog posted this balanced assessment of the competing amici  briefs and highlighted their key takeaways.  Quoting in turn to the Chancery Daily newsletter, the post thus characterizes the amicus matchup: “By WWE standards it may be a cage match of flyweight proportions, but by Delaware corporate law standards, a can of cerebral whoopass is now deemed open.”

New Group of Law Professors Seeks to be Heard by Delaware Supreme Court**

Posted in Award Premium, Merger Price, Supreme Court

Further to our prior posts on DFC Global’s appeal to the Delaware Supreme Court, a new group of law and economics professors moved the Court on Friday to consider their brief rebutting the amicus brief previously filed in support of DFC Global’s appeal; the prior brief argued for instituting a new rule requiring deference to the merger price in appraisal cases where the court is satisfied that a sufficiently robust M&A auction process took place.  In the February 3 filing, the new group of law and economics professors asked the Supreme Court to allow them to file their brief supporting affirmation of the trial court’s decision awarding stockholders an appraised value at a premium above the merger price.  The new filing argues that deference to a merger price rule in appraisal cases is unwarranted, inefficient, and contrary to the appraisal statute itself and the Delaware case law, regardless of how carefully crafted the preconditions for such a rule may be.

 

** This law firm was counsel of record on the brief discussed in this post.

“Appraisals Gone Wild”

Posted in Award Premium, Fair Value, Merger Price, Number of Appraisal Rights Filings

This article by Stout Risius Ross surveys all appraisal rulings since 2010 and identifies certain key metrics in those decisions, including the court’s valuation methodology, whether an auction or go-shop was included in the M&A transaction, and the mean and median premium over merger price resulting from those awards.

Delaware Supreme Court Allows Law Professors to Be Heard in DFC Global Appeal

Posted in Award Premium, Merger Price, Supreme Court

We have posted before about the amicus brief that a collection of law professors has asked to put before the Delaware Supreme Court as it hears the DFC Global appeal.  On Friday, the Supreme Court granted their request and will consider their submission advocating that the chancery courts should defer to the merger price when reached as a result of a robust, pristine M&A auction.  This ruling was made despite the opposition voiced by the DFC Global stockholders defending the lower court’s decision to award them a premium to the merger price.  The Court found that the professors may be able to provide it with some “unique supplemental assistance” in this case, which involved a question of “general public importance.”

A Critique of Pegging Appraised Fair Value at Merger Price

Posted in Award Premium, Blow Provisions, Fair Value, Merger Price, Shareholder Vote

In a new post by the Harvard Law School Forum on Corporate Governance and Financial Regulation, Professor Albert Choi (Virginia Law School) and Professor Eric Talley (Columbia Law School) present their new working paper, which asks how best to measure “fair value” in an appraisal proceeding.

Applying principles of game theory and auction design, the authors show that as a general matter, setting the appraised value at merger price (using a so-called MP rule) “depress both acquisition prices and target shareholders’ expected welfare relative to both an optimal appraisal rule and several other plausible alternatives.”  The authors argue that the MP rule is the functional equivalent of nullifying the appraisal right altogether.

Law360 Highlights DFC Global Case

Posted in Award Premium, Merger Price, Supreme Court

Law360 has provided some Delaware Chancery Cases to Watch in 2017 [$$$], highlighting the DFC Global case, which we’ve blogged about previously.  The Law360 commentary, like ours, notes that this will be an opportunity for the Delaware Supreme Court to weigh in on the factors relevant to appraisal and will be a closely watched decision.

DFC Global Stockholders Urge Supreme Court to Disregard Professors’ Insistence on Merger Price as “Academic Fantasy”

Posted in Award Premium, Merger Price, Supreme Court

We have blogged before about the purported “friend of the court” brief that a group of law professors would like to file with the Delaware Supreme Court, urging the Court to reverse the Chancery Court’s ruling awarding DFC Global stockholders a premium to the merger price.

The stockholders have now filed their own brief opposing the academics’ proposed submission.  They deride the professors as “interlopers” pursuing an “academic fantasy” and attack the proposed amicus brief as a mere regurgitation of DFC Global’s argument that the Chancery Court should defer to the merger price as the sole indication of fair value when that transaction price was purportedly the product of a pristine, arm’s-length auction process.

In particular, the stockholders argue that the academics should not be heard because they have no direct interest in the outcome of the appeal; their arguments repeat what DFC Global already said in its appellate brief; and, they exaggerate the impact of the Chancery Court’s opinion on the M&A market, while attempting to insert new facts and assertions into the case that were not included in the record evidence adduced at trial.

The Supreme Court has not yet ruled on whether it will accept the amicus brief or not; we will continue to monitor this appeal for further filings and rulings.