Delaware Chancery explains logic behind use of market price in Aruba case

Verition Partners Master Fund Ltd. v. Aruba Networks, Inc., 2018 Del. Ch. LEXIS 160 (May 21, 2018) (Aruba II)

After the petitioners in a statutory appraisal action recently lost big, they undertook a multifaceted assault on the Delaware Court of Chancery’s decision to use the unaffected market price as the indicator of value. Their motion for reargument went nowhere.

The instant dispute arose out of Hewlett-Packard’s acquisition of Aruba Networks Inc. that resulted in a deal price of $24.67 per share. As the petition for statutory appraisal made its way through the Court of Chancery, the Delaware Supreme Court issued its groundbreaking decisions in Dell and DFC Global, finding that, in valuing a public company, often the market price was the most reliable sign of fair value.

In adjudicating the instant case, Vice Chancellor Laster, who was the author of the original Dell decision, considered the high court’s directives and found the two “most probative” indicators of fair value were the 30-day unaffected market price, which was $17.13 per share, and the deal-price-minus-synergies price, which the court determined to be $18.20. The court concluded the unaffected market price was more reliable because it was direct evidence of how the market valued Aruba as a going concern. 

In their motion for reargument, the petitioners called the court’s reliance on the unaffected market price “ridiculous” and “absurd.” 

In addressing the numerous attacks on its adjudication, the court noted that the high court rulings had “changed things” when it came to appraisal jurisprudence and explained how its own decision in favor of the market price made sense in light of Dell and DFC Global

For more on the Court of Chancery’s analysis, click here.

A digest of the Delaware Supreme Court’s Dell decision may be found here.

A digest of the Delaware Supreme Court’s DFC Globaldecision is available here.