Topic: Projections

IN STATUTORY MERGER APPRAISAL PROCEEDING, CHANCERY COURT DECLINES USE OF THE DISCOUNTED CASH FLOW ANALYSIS TO DETERMINE FAIR VALUE AND UPHOLDS DEAL PRICE AS BEST INDICATOR OF FAIR VALUE

By Annette Becker and Rikiya Thomas

In In Re Appraisal of PetSmart, Inc., C.A. No. 10782-VCS (Del. Ch. May 26, 2017), the Delaware Court of Chancery confirmed in a statutory appraisal proceeding that the fair value of the shares of common stock of PetSmart, Inc. (“PetSmart” or the “Respondent”) at the time of its going-private merger transaction was the deal price of $83 per share.  The Court reached this conclusion after thoroughly examining and ultimately rejecting the use of the discounted cash flow (“DCF”) analysis to determine fair value as proposed by a group of plaintiff former stockholders of PetSmart (the “Petitioners”).

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Directors’ Failure to Consider Speculative Projections in Recommending Tender Offer to Stockholders Insufficient to Plead a Claim for Breach of the Duty of Loyalty Based on Bad Faith

By: Michelle McCreery Repp and Benjamin Kendall

In In re Chelsea Therapeutics International Ltd. Stockholders Litigation, Consol. C.A. No. 9640-VCG (Del. Ch. May 20, 2016), the Delaware Chancery Court held that Plaintiffs, who alleged bad faith on the part of corporate directors based on a failure to adequately take into account speculative financial projections in evaluating the adequateness of an acquisition offer, had failed to state a claim on which relief could be granted.

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