DE Chancery's Chancellor Strine may switch courts

BVWireIssue #136-2
January 15, 2014

Delaware's governor, Jack Markell, nominated Leo Strine, the chief judge of the Delaware Court of Chancery, to head the Delaware Supreme Court, the final arbiter of state laws. Chancellor Strine is well known to valuation professionals for his meaty, often colorful, legal opinions in shareholder dispute and statutory appraisal cases. 

For example, in the 2012 case In re El Paso Corp. Shareholders Litigation, he wrote that Goldman Sachs had used “questionable” and “suspicious” valuations to exert a “troubling” influence over Kinder Morgan’s billion-dollar bid for the El Paso Corp., an energy company that operated a natural gas pipeline business and an exploration and production (E&P) division. When it announced that it would spin off the E&P business in May 2011, Kinder Morgan offered $25.50 per share for the entire company. After consulting with Goldman Sachs and an independent bank, El Paso's board countered with an offer of $28.00 per share and sent its CEO to negotiate the deal directly with the Kinder CEO. By late September 2011, the chief executives had agreed on a $27.55 merger price.

As Chancellor Strine described the situation, just one day after settling the deal terms, “Kinder said, ‘Oops, we made a mistake. We relied on a bullish set of analyst projections in order to make our bid. Our bad.’” The El Paso CEO backed down and then continued to take the deal on a “downward spiral,” he added. 

Commenters have noted that the appointment, if confirmed, would take the Chancellor into the more sobersided world that is the state Supreme Court. 

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