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.
Last week the Federal Reserve issued another rate hike, just months after its December rate increase. The recent hike has increased the Fed’s discount rate — also known as its primary credit rate — by 0.25%, up to 1.50%. Effective as of March 16, 2017, this will increase the rate of statutory interest in appraisal cases to 6.50%, compounded quarterly, as the appraisal statute sets interest at 5% over the Federal Reserve discount rate.
Cooley LLP highlights that increased appraisals are being factored into mergers. Following up on a previous piece, Cooley LLP notes that appraisal costs can be large, referencing the over $50 million added to the merger price in Dell, and further comments on the rise of appraisal claims, which Cooley calculates as a 267% increase from 2012 to 2016. We’ve posted previously on the uptick in appraisal filings, and how the August 2016 amendments may further increase filings, as well as what this means for investors interested in the strategy.
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 burden in appraisal (~14:20); interest rates and the relevance of interest (~21:30); how to determine fair value (~23:30); and the future of appraisal (~29:00).