The Harvard Law School Forum on Corporate Governance and Financial Regulation recently carried a post by Theodore Mirvis of Wachtell Lipton, “Delaware Appraisal at a Crossroads?” This HLS Forum post discusses the recent DFC argument – which we’ve posted about – and lays out a variety of thoughts on future questions in appraisal and appraisal… Continue Reading
The Supreme Court heard argument yesterday from DFC Global and its dissenting stockholders. The court has not yet ruled, and nobody can predict how it will decide the case; the following questions and observations are just some of the points that different members of the full five-justice panel raised during argument: The court asked DFC Global… Continue Reading
In anticipation of tomorrow’s oral argument before the Delaware Supreme Court, Law360 published this piece offering insights into what may lie ahead for appraisal rights after the DFC Global and Dell appeals are decided.
Further to our prior post about Delaware’s two new appraisal decisions, SWS Group was a small, struggling bank holding company that merged on January 1, 2015 into one of its own substantial creditors, Hilltop Holdings. Stockholders of SWS received a mix of cash and Hilltop stock worth $6.92 at closing. Vice Chancellor Glasscock rejected the… Continue Reading
Further to our prior post on the recent PetSmart decision, we wanted to highlight some key factors that led the court to peg its fair value determination at the merger price. In PetSmart, the Delaware chancery court found that the sales process, while not perfect, was good enough to produce a reliable indicator of PetSmart’s… Continue Reading
This piece by Law360, “Appraisal Actions May Be The Next Frontier For PE Shops,” discusses a range of reactions to the closely watched rulings in the DFC Global and Dell appraisal cases currently on appeal before the Delaware Supreme Court. Some commentators see the appraisal strategy becoming more attractive to private equity funds as the… Continue Reading
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.
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.
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
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
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 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
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
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
The so-called market-out exception precludes appraisal where the target’s stock trades in a highly liquid market. In other words, appraisal is normally available to shareholders except, as the rationale goes, where the M&A target’s stock trades in such a liquid, highly efficient market that its stock price naturally reflects its fair value, and any M&A… Continue Reading
Vice Chancellor Glasscock issued his valuation decision this week in the BMC Software case, which we have previously blogged about concerning its threshold ruling rejecting any share-tracing requirements and thus allowing appraisal arbitrageurs to proceed with a valuation case. As we have previously reported, Merion Capital was seeking a 45% premium to the merger price,… Continue Reading
In his second appraisal decision in as many months, Chancellor Bouchard faced the novel question of whether the Chancery Court can approve a settlement between the surviving company and certain non-appearing dissenters, who had never themselves filed or joined in an appraisal petition, if the terms of that settlement are unavailable to all of the… Continue Reading
The Delaware Chancery Court’s recent opinion in Owen v. Cannon has garnered little notice or press coverage, but deserves attention not only because the hybrid fiduciary duty-appraisal decision is Chancellor Bouchard’s first foray into the appraisal space, but because it reinforces some basic appraisal tenets and yet also bucks what some have called a recent… Continue Reading
Delaware’s latest appraisal decision in LongPath Capital v. Ramtron International Corp. adopted the merger price as its appraisal valuation, but stands apart from the other recent appraisal decisions that likewise fell back on transaction consideration. Here, the court’s lengthy opinion repeatedly lamented the lack of any remotely reliable means of valuation other than the merger… Continue Reading
A widely followed corner of the blog is our “Valuation Basics” series, where in earlier posts we have described many of the components of the discounted cash flow analysis, the income-based valuation methodology preferred by Delaware’s Court of Chancery. (See here, here, and here). Earlier this month we examined a market-based valuation approach — the… Continue Reading
As reported in Law360, stockholder Merion Capital LP petitioned the Delaware Chancery Court this week for an award of $67 per share for its stock in BMC Software, Inc. Such a demand would reflect a 45% premium to the merger price of $46.25. Indeed, as Law360 reported, the parties’ arguments focused to a large degree… Continue Reading
Our “Valuation Basics” series has focused on the various components of a discounted cash flow analysis under the income approach, which seeks to value a company based on the present value of its projected cash flows. This post and those to follow in this series will now move away from the income approach and instead… Continue Reading
Last week the Delaware Supreme Court’s en banc hearing in the CKx case resulted in a simple affirmance, without opinion, of the Chancery Court’s 2013 decision that the merger price in this particular case was the best proxy for the fair value of petitioners’ stock. In CKx, the Chancery Court had rejected the valuation methodologies… Continue Reading
We posted last month about the Delaware Chancery Court’s ruling in Ancestry.com, in which it upheld the growing practice of appraisal arbitrage. The Chancery Court has now rendered its valuation decision in that case, finding the merger price itself to be the most fair measure of stockholder value on a going concern basis. As Reuters… Continue Reading