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Cheng v. Coastal Lb Assocs.

This case concerned the purchase of minority interests in a California limited liability company under the Corporate Code concerning the purchase of these interests in lieu of a liquidation of the company. The appellate court affirmed the trial court’s order confirming the purchase of these interests at a discounted fair market value.

California Court of Appeal Allows a Discount for Lack of Control in the Buyout of 25% Interests in an LLC

This case concerned the purchase of minority interests in a California limited liability company under the Corporate Code concerning the purchase of these interests in lieu of a liquidation of the company. The appellate court affirmed the trial court’s order confirming the purchase of these interests at a discounted fair market value.

Pourmoradi v. Gabbai

This California appellate case reviewed the trial court’s decision that discounts for lack of control and lack of marketability were not appropriate in determining the value to be paid to the plaintiffs in this corporate dissolution case where the remaining 50% owners exercised their right to purchase the plaintiff’s 50% interest in the LLC.

California Appellate Court Remands for Application of Trial Court of Wrong Standard of Value Denying Discounts

This California appellate case reviewed the trial court’s decision that discounts for lack of control and lack of marketability were not appropriate in determining the value to be paid to the plaintiffs in this corporate dissolution case where the remaining 50% owners exercised their right to purchase the plaintiff’s 50% interest in the LLC.

Recap of recent BV cases of note

A number of recent cases have emerged that contain various valuation issues.

Island Light & Power Co. v. Sara Golvinveaux McGinnes 2011 Trust

In this shareholder dissent suit, the one-third shareholder of Island Light & Power Co. (aka BIPCO) dissented to a forced sale of the assets of BIPCO resulting in a liquidation of BIPCO and of the shareholder Trust’s stock. In a resulting bench trial, the court rejected the fair value determinations of the experts for both parties and adopted its own methodology (as is allowed by Rhode Island courts, including its Supreme Court) to determine the fair value of the one-third interest held by the Trust.

Court Adopts its Own Methodology in Determining Fair Value in a Shareholder Dissent Suit

In this shareholder dissent suit in Rhode Island, the one-third shareholder of Island Light & Power Co. (aka BIPCO) dissented to a forced sale of the assets of BIPCO resulting in a liquidation of BIPCO and a liquidation of the shareholder Trust’s stock. In a bench trial resulting from the dissent, the court rejected the fair value determinations of the experts for both parties and adopted its own methodology (as is allowed by Rhode Island courts, including its Supreme Court) to determine the fair value of the one-third interest held by the Trust.

Court of Chancery adopts deal price, adjusting for synergies and tax savings

In a statutory appraisal action, the Delaware Court of Chancery recently adopted the deal price minus synergies as the best indicator of fair value.

In Appraisal Action, Court Determines Fair Value Using Deal Price Minus Synergies and Adjusting for Increase in Value From Signing to Closing of Merger

In a merger action involving a publicly traded company, dissenting shareholders sued for a higher value than the deal consideration. Under the applicable appraisal jurisprudence, the court calculates fair value using the deal price minus synergies and adjusting for the change in value of the target between the signing and closing of the transaction.

In re Appraisal of Regal Entertainment Group

In a merger action involving a publicly traded company, dissenting shareholders sued for a higher value than the deal consideration. Under the applicable appraisal jurisprudence, the court calculates fair value using the deal price minus synergies and adjusting for the change in value of the target between the signing and closing of the transaction.

Court of Chancery sanctions use of asset approach in complex appraisal case

A low-profile appraisal case in front of the Delaware Court of Chancery raised important valuation questions, including how the court should determine the fair value of a nonoperating entity and how it should deal with the value of claims both parties brought on behalf of the company prior to the contested merger.

In re Happy Child World, Inc.

In an entire-fairness-cum-statutory-appraisal case involving nonoperating day care center whose facility was leased on merger date, court approves use of capitalization of earnings and NAV models and averaging results to determine fair value; business model was uncertain on merger date, court notes.

Uncertain Business Model on Merger Date Justifies Use of Income and NAV Models, Court Says

In an entire-fairness-cum-statutory-appraisal case involving nonoperating day care center whose facility was leased on merger date, court approves use of capitalization of earnings and NAV models and averaging results to determine fair value; business model was uncertain on merger date, court notes.

Flaws in North Carolina Court’s Appraisal of Reynolds American

The wrong valuation date, a faulty reliance on other cases and the disregard of projections highlight the court’s opinion in a shareholder dissent case involving two tobacco giants.

In a crunch, court adopts company’s DCF model as fair value indicator

In a statutory appraisal action prompted by the 2016 buyout of minority shareholders by the controller of a private company, the Delaware Court of Chancery recently found there was no meaningful market-based evidence of fair value and neither expert opinion, based on standard valuation methods, was “wholly reliable.”

Fair Value Standard Does Not Preclude Use of Net Asset Approach, Court Affirms

In statutory appraisal case, court denies summary judgment motion arguing opposing expert’s valuation fails to meet legal definition of fair value, i.e., “the value of the company as a whole and as a going concern”; court says controlling case law does not preclude use of net asset value method.

Henley Mining v. Parton

In statutory appraisal case, court denies summary judgment motion arguing opposing expert’s valuation fails to meet legal definition of fair value, i.e., “the value of the company as a whole and as a going concern”; court says controlling case law does not preclude use of net asset value method.

Kruse v. Synapse Wireless, Inc.

In appraisal action arising out of controller’s buyout of minority stockholders, court finds there is no reliable market evidence as to target’s fair value on merger date; none of expert valuations are “wholly reliable,” but one expert’s DCF analysis offers a “proportionately reliable conclusion.”

Lacking Any Wholly Reliable Indicators of Fair Value, Court Adopts Respondent's DCF Model

In appraisal action arising out of controller's buyout of minority stockholders, court finds there is no reliable market evidence as to target's fair value on merger date; none of expert valuations are "wholly reliable," but one expert's DCF analysis offers a "proportionately reliable conclusion."

Fir Tree Value Master Fund v. Jarden Corp., (Jarden III)

High court affirms trial court’s use of unaffected market price as fair value in statutory appraisal involving merger of publicly traded company; high court rejects petitioners’ late argument that, where sale process was flawed and company failed to prove synergies, deal price should act as floor.

No ‘Long-Recognized Principle’ Against Use of Market Price as Fair Value Indicator, High Court Says

High court affirms trial court’s use of unaffected market price as fair value in statutory appraisal involving merger of publicly traded company; high court rejects petitioners’ late argument that, where sale process was flawed and company failed to prove synergies, deal price should act as floor.

North Carolina court looks to deal price for fair value in tobacco merger

The importance of Delaware appraisal jurisprudence beyond state borders was on display in a recent fair value decision out of North Carolina related to a merger involving the tobacco giant Reynolds.

Reynolds American Inc. v. Third Motion Equities Master Fund Ltd.

In appraisal action involving merger of public (tobacco) company, court, guided by key Delaware court decisions, says deal price best reflects fair value and represents upper limit; contemporaneous valuations based on comparable companies, precedent transactions, and DCF support use of deal price.

North Carolina Court Says Deal Price Represents Upper Limit of Tobacco Company’s Fair Value

In appraisal action involving merger of public (tobacco) company, court, guided by key Delaware court decisions, says deal price best reflects fair value and represents upper limit; contemporaneous valuations based on comparable companies, precedent transactions, and DCF support use of deal price.

Synergy deduction purely academic in new Delaware appraisal ruling

In a statutory appraisal case that involved the sale of a publicly traded company to a privately held entity, the Delaware Court of Chancery recently decided the deal price was a reliable indicator of fair value and a downward adjustment for synergies was justified.

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