Flawed Sales Process Has Chancery Revert to DCF to Determine Fair Value
Chancery rejects deal price as indicator of fair value, citing problematic sales process, and rejects use of unaffected trading price, citing company’s lack of trading history; court instead relies on its own DCF analysis, drawing on the most credible aspects of each expert’s analysis.
BVLaw case update: buyout disputes
Even when the members of a business entity plan ahead for a potential buyout, a lot can still go wrong, often because the language in a controlling shareholder agreement leaves too much room for interpretation or a necessary corporate document is missing.
Athlon Sports Communications, Inc. v. Duggan (II)
Court overrules precedent requiring exclusive use of Delaware block method to determine fair value in dissenting shareholder cases; trial courts may use other, more “modern” methods, including forward-looking DCF analysis, state high court says and remands for reevaluation of earlier ruling.
Delaware Block Method No Longer Mandatory in Tennessee Fair Value Proceedings
Court overrules precedent requiring exclusive use of Delaware block method to determine fair value in dissenting shareholder cases; trial courts may use other, more “modern” methods, including forward-looking DCF analysis, state high court says and remands for reevaluation of earlier ruling.
Verition Partners Master Fund Ltd. v. Aruba Networks, Inc. (Aruba II)
Court of Chancery denies petitioners’ motion for reargument, finding that, in light of high court’s Dell and DFC decisions, the decision to use the unaffected market price as the fair value indicator was not so “ridiculous” or “absurd” as to indicate the Court of Chancery misapprehended the law.
Chancery Defends Use of Market Price Citing Recent High Court Rulings
Court of Chancery denies petitioners’ motion for reargument, finding that, in light of high court’s Dell and DFC decisions, the decision to use the unaffected market price as the fair value indicator was not so “ridiculous” or “absurd” as to indicate the Court of Chancery misapprehended the law.
Problematic process causes Chancery to use DCF as fair value indicator
The discounted cash flow analysis is not dead yet in the Delaware Court of Chancery.
In re Tesla Motors Stockholder Litig.
Court of Chancery says Tesla dissenting shareholders allege sufficient facts to show company CEO, Elon Musk, was a controlling shareholder, despite holding a minority interest; court allows breach of fiduciary claims concerning acquisition of related company to proceed.
Court Allows Tesla Dissenting Shareholder Suit to Go Forward
Court of Chancery says Tesla dissenting shareholders allege sufficient facts to show company CEO, Elon Musk, was a controlling shareholder, despite holding a minority interest; court allows breach of fiduciary claims concerning acquisition of related company to proceed.
In re AOL Inc.
In statutory appraisal, court finds sales process was not “Dell compliant” and declines to assign any weight to deal price; court agrees with parties’ experts that DCF best captures fair value on valuation date and arrives at final value below deal price.
Chancery Relies on DCF Where Deal Process Is Not ‘Dell Compliant’
In statutory appraisal, court finds sales process was not “Dell compliant” and declines to assign any weight to deal price; court agrees with parties’ experts that DCF best captures fair value on valuation date and arrives at final value below deal price.
Verition Partners Master Fund Ltd. v. Aruba Networks, Inc. (Aruba I)
In statutory appraisal proceeding, Court of Chancery says unaffected market price provides “direct evidence of the collective view of market participants” as to target’s fair value whereas deal-price-minus-synergies is a less reliable “indirect measure.”
Court Calls Stock Price ‘Most Straightforward’ Indicator of Fair Value
In statutory appraisal proceeding, Court of Chancery says unaffected market price provides “direct evidence of the collective view of market participants” as to target’s fair value whereas deal price minus synergies is a less reliable “indirect measure."
City of Hialeah Emples. Ret. Sys. v. FEI Co.
Court rejects dissenting shareholder’s proxy challenge, finding board member statements about management projections are protected under applicable act’s safe harbor provision; also, court says financial advisor’s fairness opinion did not double count for risk in underlying DCF analysis.
Financial Advisor’s Fairness Opinion Not Materially Misleading
Court rejects dissenting shareholder’s proxy challenge, finding board member statements about management projections are protected under applicable act’s safe harbor provision; also, court says financial advisor’s fairness opinion did not double count for risk in underlying DCF analysis.
Dell, Inc. v. Magnetar Global Event Driven Master Fund Ltd. (II)
High Court rejects Chancery’s decision to disregard deal price entirely in favor of court’s DCF analysis; record belies Chancery’s finding that deal price undervalued company stock, High Court says, urging adoption of deal price as fair value on remand.
Delaware Supreme Court Rebukes Chancery for Disregarding Deal Price
High Court rejects Chancery’s decision to disregard deal price entirely in favor of court’s DCF analysis; record belies Chancery’s finding that deal price undervalued company stock, High Court says, urging adoption of deal price as fair value on remand.
Springer v. Library Store
Court upholds lower court ruling that there was no mismanagement of corporate assets; plaintiff failed to show excessive officer compensation and was properly precluded from using testifying expert to introduce another appraiser’s report on excessive rent.
Court Clarifies Application of Rule 703 to Expert Testimony
Court upholds lower court ruling that there was no mismanagement of corporate assets; plaintiff failed to show excessive officer compensation and was properly precluded from using testifying expert to introduce another appraiser’s report on excessive rent.
Kottayil v. Insys Therapeutics, Inc.
In shareholder suit involving pharmaceutical startup with uncertain prospects, appeals court upholds trial court’s rejection of expert testimony based on “traditional” valuation methods in favor of noncontemporary IPO valuation to determine fair value.
Court Validates Use of IPO Valuation in Fair Value Proceeding
In shareholder suit involving pharmaceutical startup with uncertain prospects, appeals court upholds trial court’s rejection of expert testimony based on “traditional” valuation methods in favor of noncontemporary IPO valuation to determine fair value.
DFC Global Corp. v. Muirfield Value Partners, L.P. (II)
State Supreme Court declines to create presumption for appraisal actions that deal price is best indicator of value when merger was arm’s-length transaction, but court finds Chancery’s valuation approach lacked support in record and requires revaluation.
High Court Finds Chancery’s Weighting of Values Unexplained and Inexplicable
State Supreme Court declines to create presumption for appraisal actions that deal price is best indicator of value when merger was arm’s-length transaction, but court finds Chancery’s valuation approach lacked support in record and requires revaluation.
ACP Master, Ltd. v. Sprint Corp.
In joint fiduciary-appraisal action centering on Sprint’s acquisition of minority interest in related entity, Chancery says merger was entirely fair and adopts respondent expert’s DCF analysis; huge value gap is 90% due to experts’ choice of projections.
DCF Projections Failed to Reflect Target’s Operative Reality, Chancery Says
In joint fiduciary-appraisal action centering on Sprint’s acquisition of minority interest in related entity, Chancery says merger was entirely fair and adopts respondent expert’s DCF analysis; huge value gap is 90% due to experts’ choice of projections.