Topic: Cede & Co.

Court of Chancery Approves Modifying Merger-Related Class Action Settlement to Distribute Proceeds to Record Stockholders through DTC

In re Dole Food Company, Inc., Stockholders Litigation

By: Remsen Kinne and Eryn Correa

The Court of Chancery granted a motion for leave to modify a settlement agreement in a merger-related class action suit to distribute settlement proceeds through DTC to Dole Food Company, Inc. (“Dole”) common stockholders of record. The Court held that the original stipulation providing for settlement proceeds to be distributed to both record holders and beneficial holders through a traditional notices and claims forms process proved to be too costly and burdensome in practice, which justified modifying the allocation procedure.

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Chancery Court Dismisses Appraisal Challenge Based on Re-Titling of Shares, But Advocates For a Different Approach

By Annette Becker and Lauren Garraux

On July 13, 2015, Vice Chancellor J. Travis Laster issued his Memorandum Opinion in In re Appraisal of Dell Inc. in which he granted Dell’s motion for summary judgment against five institutions which owned Dell common stock and sought appraisal in connection with a going-private merger of the Company which closed in October 2013.  Though Vice Chancellor Laster acknowledged that Dell’s motion “must be granted” based on existing Delaware precedent interpreting the requirement that a stockholder who wishes to pursue appraisal “continuously hold[] such shares through the effective date of the merger,” the Vice Chancellor advocated for and urged the Delaware Supreme Court to adopt the federal law approach which, if applied, would allow the petitioners’ appraisal challenge to proceed.

In February 2013, Dell agreed to a merger in which each publicly held share of Dell common stock would be converted into the right to receive $13.75 in cash, subject to the right of stockholders to seek appraisal under Section 262 of the Delaware General Corporation Law (“DGCL”).  In July 2013, prior to the vote on the merger, five institutions who owned approximately 922,975 shares of Dell common stock (the “Petitioners” or “Funds”) in street name through their custodial banks caused Cede & Co. (“Cede”), the nominee of the Depository Trust Company (“DTC”) and the entity in whose name the shares were registered, to demand appraisal rights on their behalf .

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