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Appraisal Rights Litigation Blog

Category Archives: Award Premium

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Law360: “The Misconception About SWS Appraisal Decision”

Posted in Award Premium, Merger Price

Law360 [$$] recently covered appraisal rights, presenting an analysis by attorneys at Fried Frank [pdf] discussing the SWS appraisal decision.  In their article, the Fried Frank lawyers note their view that it is a “misconception” that SWS heralds a new likelihood of below-merger-price appraisal decisions.  Reviewing the SWS decision and the appraisal jurisprudence, the authors… Continue Reading

DFC Global a “Lightning Rod” for the Merger-Price Debate

Posted in Appraisal Arbitrage, Award Premium, Discounted Cash Flow Analysis, Fair Value, Merger Price, Supreme Court

The Financial Times published this critical assessment [$$$] of the DFC Global ruling and of the appraisal arbitrage strategy more generally, observing that the pending DFC Global appeal frames the current debate about what role, if any, merger price should play in appraisal cases.

CLS BlueSky: Podcast with Vice Chancellor Laster

Posted in Award Premium, Merger Price, No Proof of Wrongdoing Needed

In a recent podcast, the Columbia Law School BlueSky Blog features Delaware Vice Chancellor Laster – whose appraisal decisions we have covered repeatedly – discussing the appraisal remedy.  While the entire podcast is certainly worth a listen, some important topics include the history of appraisal (~1:30); when markets may depart from fair value (~5:50); how appraisal may act as a reserve price (~9:30); the discovery… Continue Reading

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… Continue Reading

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… Continue Reading

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… Continue Reading

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… Continue Reading

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… Continue Reading

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… Continue Reading

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… Continue Reading

Professors Weigh In On DFC Global Appeal

Posted in Award Premium, Discounted Cash Flow Analysis, Merger Price, Supreme Court

We posted earlier this week about DFC Global’s appeal to the Delaware Supreme Court, challenging Chancellor Bouchard’s award to stockholders of a premium over merger price.  Yesterday, a group of law and corporate finance professors from various universities moved the Supreme Court to allow them to file so-called amici curiae briefs as non-party “friends of… Continue Reading

Supreme Court to Review DFC Global Award

Posted in Award Premium, Discounted Cash Flow Analysis, Merger Price, Supreme Court

We’ve posted before about the DFC Global decision, in which Chancellor Bouchard awarded a 7% premium over merger price, and then further increased that uplift by 9 cents in a ruling on reconsideration.  That ruling is now on appeal to the Delaware Supreme Court, and the appellant’s brief was submitted last week. As reported in… Continue Reading

Delaware Chancery Again Rejects Merger Price and Awards Premium

Posted in Award Premium, Closely Held Target, Discounted Cash Flow Analysis, Discounted Net Income Analysis, Equity Risk Premium, Guideline Public Company Valuation, Independent Valuation, Merger Price, Perpetuity Growth Rate, Precedent Transactions

In Farmers & Merchants Bancorp, an appraisal case involving a small closely-held community bank that was sold in a stock-for-stock deal valued at $83 per share, Chancellor Bouchard disregarded merger price, as well as the “wildly divergent valuations” of both sides’ experts.  He arrived at an independent valuation of $91.90 per share based on his… Continue Reading

The Real Problem With Appraisal Arbitrage

Posted in Appraisal Arbitrage, Award Premium, Discounted Cash Flow Analysis, Fair Value, Merger Price, Perpetuity Growth Rate, Stock Market Price, Supply-side Discount Rate, WACC

In response to the article on appraisal arbitrage by Gaurav Jetley and Xinyu Ji of the Analysis Group, about which we’ve posted before, Villanova Law Professor Richard A. Booth now argues in  The Real Problem With Appraisal Arbitrage [via Social Science Research Network] that Jetley and Ji’s charge against the Delaware courts for overly indulging… Continue Reading

The Case for Appraisal Rights

Posted in Award Premium, Fair Value, Interest on Appraised Value, Number of Appraisal Rights Filings

For an interesting overview of the appraisal process and a concise summary of the merits and risks associated with litigating appraisal rights, we recommend reviewing the article “Opportunistic Investing – the Case for Appraisal Rights” from Neuberger Berman’s Hedge Funds Solutions Group. In describing appraisal as a “niche, legally intensive strategy” with the “potential for… Continue Reading

Delaware Chancery Court Increases Appraisal Award

Posted in Award Premium, Discounted Cash Flow Analysis, Perpetuity Growth Rate, Risk-free Rate, Terminal Value, Valuation Expert

In a new ruling in the DFC Global appraisal case, about which we’ve posted before, Chancellor Bouchard has now reconsidered his prior award of 7% over the merger price and increased his prior award by an extra 9 cents per share, translating to an additional $12 million in value above his prior ruling. Both sides… Continue Reading

Delaware Chancery Again Awards Appraisal Uplift

Posted in Award Premium, Comparable Companies, Direct Capitalization of Cash Flows, Discounted Cash Flow Analysis, Fair Value, Interest on Appraised Value, Merger Price, Precedent Transactions

Delaware Chancery has again awarded appraisal petitioners a significant bump above the merger price.  In the ISN Software Corp. Appraisal Litigation, Vice Chancellor Glasscock was facing widely divergent valuation from the opposing experts, and relied exclusively on a discounted cash flow analysis as the most reliable indicator of fair value.  The court’s per-share valuation award… Continue Reading

Delaware Chancery Again Awards Value Above Merger Price

Posted in Award Premium, Beta, Comparable Companies, Discounted Cash Flow Analysis, Fair Value, Interest on Appraised Value

On July 8, the Delaware Court of Chancery issued its opinion in In re Appraisal of DFC Global Corp.  A financial buyer, Lone Star Fund VIII, acquired DFC Corporation in June 2014 for $9.50 per share in an all-cash deal.  Using a combination of a discounted cash flow analysis, comparable companies analysis, and the merger… Continue Reading

Delaware Chancery Awards 28% Premium in Dell Appraisal Case

Posted in Award Premium, Fair Value, Interest on Appraised Value, Merger Price

In a highly anticipated appraisal decision, Vice Chancellor Laster today valued Dell’s common stock at $17.62 per share, reflecting a 28% premium above the $13.75 merger price that was paid to Dell shareholders on October 29, 2013.  The court further ordered that interest shall accrue on this amount at the statutory rate of interest (5%… Continue Reading

Academics Propose New Reforms for Appraisal

Posted in Appraisal Arbitrage, Appraisal-Eligible Deals, Award Premium, Dollar Amount of Appraisal Rights Filings, Interest on Appraised Value, Merger Price, Number of Appraisal Rights Filings, Record Date

We’ve posted before about the article by Professors Charles Korsmo and Minor Myers analyzing the recent surge in appraisal activity.  These co-authors have prepared a new draft article to be published in the Delaware Journal of Corporate Law, proposing reforms for appraisal litigation.  Based on their latest research the authors stand by their prior conclusion… Continue Reading

Opportunities with Appraisal Litigation

Posted in Appraisal Arbitrage, Award Premium, Number of Appraisal Rights Filings

Today’s Hedge Fund Law Report ran an article about the appraisal remedy, its positive results and its distinctiveness from traditional stockholder litigation.  That article, “Stockholder Appraisal Actions Present an Attractive Litigation-Based Strategy for Hedge Fund Managers,” also discusses the proposed legislative amendments, judicial limitations and potential opportunities that we’ve posted on before.