In Merion Capital L.P. v. Lender Processing Services, Inc., No. 9320-VCL (Del. Ch. Dec. 16, 2016), the petitioners, Merion Capital L.P. and Merion Capital II L.P. (together, “Merion” or “Petitioners”), issued a post-trial opinion in an appraisal proceeding arising from the acquisition by merger (the “Merger”) of Lender Processing Services, Inc. (the “Company” or “Respondent”) by Fidelity National Financial, Inc. (“Fidelity”). After a four-day trial, the Chancery Court concluded that the fair value of the Company’s stock at the effective time of the Merger was the merger price as a result of a properly conducted sale process.
In In Re Appraisal of Dell, C.A. No. 9322-VCL, (Del. Ch. May 31, 2016), stockholders of Dell Inc. (“Dell”) sought appraisal of their shares in connection with Dell’s 2013 “go-private” merger. Vice Chancellor Laster of the Delaware Court of Chancery held that the fair value of the Dell’s common stock at the effective time of the merger was $17.62, approximately a 28% premium over the final merger consideration of $13.75 per share. In making its determination, the court rejected Dell’s contention that the negotiated merger consideration was the best evidence of Dell’s fair value and held that the Dell was sold for too little and that the concept of fair value under Delaware law is not equivalent to the economic concept of fair market value.
Merion Capital LP and Merion Capital II LP v. BMC Software, Inc. concerns an appraisal proceeding under Section 262 of the Delaware General Corporation Law in which the Chancery Court found that the deal price generated by the market through a thorough and vigorous sales process was the best indication of fair value.
On September 13, 2013, the petitioners, Merion Capital LP and Merion Capital II LP (together, “Merion”), filed a Verified Petition for Appraisal of Stock pursuant to 8 Del. C. § 262 (the “Appraisal Statute”) against respondent, BMC Software, Inc. (“BMC”). The action stemmed from a merger pursuant to which BMC’s stockholders were cashed out at a price of $46.25 per share (the “Merger”). Merion (who the court noted are “arbitrageurs who bought, not into an ongoing concern, but instead into this lawsuit”) owned 7,629,100 shares of BMC common stock. The Court presided over a four day trial in this matter, at which Merion presented expert testimony claiming that the stock was undervalued and BMC presented expert testimony claiming that the Merger price actually exceeded fair value.
Merlin Partners LP v. AutoInfo, Inc., C.A. No. 8509-VCN (Del. Ch. April 30, 2015) (Noble, V.C.) concerns an appraisal proceeding under Section 262 of the Delaware General Corporation Law in which the Chancery Court found that, where there was a strong sale and negotiation process, and there were no reliable cash flow projections from which to make a discounted cash flow analysis and there were no sales of comparably sized companies in the same business, the price received in the merger was the best indication of fair value at the time of the merger.
Petitioners were former common stockholders of Respondent, AutoInfo, Inc. (“AutoInfo”) who exercised their appraisal rights in connection with AutoInfo’s merger with Comvest Partners (“Comvest”) at a price of $1.05 per AutoInfo share. AutoInfo was struggling financially and had begun a sale process in 2011 using an investment bank, Stephens Inc. (“Stephens”), which had long experience in the applicable industry, transportation. As part of the process, Stephens asked AutoInfo’s management to prepare five year financial projections that were “optimistic” to be used to market AutoInfo. Management had never prepared similar projections before and was doubtful of the validity of the results.
On June 11, 2013, Dole Food Company, Inc. (“Dole”) announced that its board had received an unsolicited proposal from David Murdock, Dole’s CEO, Chairman, and controlling stockholder, to purchase all of the outstanding shares of Dole’s common stock for $12 per share. Approximately two months later, Dole and Murdock announced an agreement to take Dole private in a merger at $13.50 per share (the “Merger”). On October 31, 2013, Dole held a special meeting of the stockholders at which the stockholders approved the Merger, and the transaction closed on November 1, 2013.
Hudson Bay Master Fund Ltd. and Hudson Bay Merger Arbitrage Opportunities Master Fund Ltd. (together, “Hudson Bay”) and Ripe Holdings LLC (“Ripe”), as holders of Dole common stock, subsequently sought an appraisal for their shares. Ripe is a special-purpose investment vehicle managed by the affiliates of Fortress Investment Group (“Fortress”).
In Laidler v. Hesco Bastion Environmental, Inc., the petitioner, Patricia Laidler (a former employee of Hesco Bastion USA, Inc. (“Hesco”)) sought statutory appraisal pursuant to 8 Del. C. § 262 of her 10% interest in Hesco following a short-form merger of Hesco into Hesco Bastion Environmental, Inc., the holder of a 90% interest in Hesco (and respondent in this proceeding). Vice Chancellor Glasscock issued a memorandum opinion on May 12, 2014, determining the fair value per share of Hesco, the sole remedy for a freeze out merger, and explaining his methodology for the valuation.
Hesco and its affiliates design and manufacture large, mobile barrier units, designed to be filled with sand and rock and rapidly deployed for protection of land and assets in the event of a natural disaster or military emergency. Due to the variable demand for the units, Hesco’s sales and revenues varied. During November and December of 2011, shortly before the January 26, 2012 merger, third party valuations of Hesco stock were prepared in connection with the death of a stockholder who retained a controlling interest in the Hesco affiliated entities, and in connection with the put right provided to Ms. Laidler in accordance with a shareholder agreement to compel Hesco to repurchase her shares in connection with the termination of her employment. Ms Laidler was offered $180 per share by Hesco for her stock and she chose not to exercise her put at that time. Two other minority stockholders (each holding a 10% interest in Hesco) tendered their shares to respondent for $207.50 per share. Ms. Laidler was similarly offered $207.50 per share in connection with the short-form merger. Ms. Laidler declined the consideration offered and filed a petition for appraisal. In connection with seeking an appraisal Petitioner obtained an expert valuation, which valued the shares as of December 31, 2011 at $515 per share.