Tag: appraisal rights

waiver of appraisal rights in a stockholder agreement is enforceable under delaware law

By Annette Becker and Pouya Ahmadi

In Manti Holdings, LLC v. Authentix Acquisition Co., Inc., C.A. No. 2017-0887 SG (Del. Ch. Aug 14, 2019), the Delaware Court of Chancery (the “Court”) held that Contractual agreements limiting or waiving future appraisal rights are not prohibited as a matter of law under the Delaware General Corporation Law (“DGCL”).

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Delaware Supreme Court calculates Aruba’s fair value in an appraisal using deal price minus synergies, reversing lower court’s 30-day stock price calculation

By: Jessica Pearlman, Marina Mehrtens and Joseph Phelps

In Verition Partners Master Fund Ltd. and Verition Multi-Strategy Master Fund Ltd. v. Aruba Networks, Inc., C.A. No. 11448-VCL (Del. Ch. Apr. 16, 2019), the Delaware Supreme Court unanimously held that the Court of Chancery abused its discretion when it calculated the fair value per share of the common stock of Aruba Networks, Inc. (“Aruba”) in an appraisal proceeding. The Court of Chancery assessed Aruba’s per share value at $17.13 by using the 30-day average market price at which Aruba’s shares publicly traded before Aruba’s merger negotiation with Hewlett Packard Company (“HP”) became public. The Delaware Supreme Court found this improper and affirmed its practice of viewing merger consideration as evidence of fair value, calculating Aruba’s fair value per share as $19.10 (the deal price minus the portion of synergies left with the seller).

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Chancery Court Denies Appraisal Rights Where a Stockholders’ Agreement Requires that Stockholders Refrain from Appraisal Petition

By: Annette Becker and Will Smith

In a letter opinion, Manti Holdings, LLC et al. v. Authentix Acquisition Co, Civil Action No. 2017-0887-SG (Del. Ch. October 1, 2018), the Delaware Court of Chancery denied the petitioning stockholders’ cross-motion for statutory appraisal rights under Section 262 of the DGCL, ruling that the stockholders were contractually barred from asserting such rights regarding a merger of respondent Authentix Acquisition Co. (the “Company” and “Respondent”).  The Court held that the terms of a stockholders agreement (the “SA”) imposed a duty on Manti Holdings, LLC and the other moving stockholders (“Petitioners”) to forebear from the exercise of their appraisal rights, and granted Respondent’s motion for partial summary judgment on the statutory entitlement to appraisal rights.

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CHANCERY COURT SETS FAIR VALUE IN APPRAISAL ACTION BELOW THE VALUATIONS SUGGESTED BY THE PARTIES

By: Scott Waxman and Benjamin Kendall

In Verition Partners Master Fund Ltd. v. Aruba Networks, Inc., C.A. No. 11448-VCL (Del. Ch. May 21, 2018), the Delaware Court of Chancery denied a motion for reargument of its earlier decision setting the appraisal value of the shares of Aruba Networks, Inc. (“Aruba” or the “Company”) at the time of its acquisition by Hewlett-Packard Company (“HP”).  Although the merger agreement offered $24.67 per share of the Company, and the Company ultimately suggested that the fair value of the Company’s shares was $19.75, the Court of Chancery set the fair value of the Company’s shares at $17.13. In denying the motion for reargument, the Court of Chancery reiterated its position that the trial court must independently determine the fair value of the shares in an appraisal proceeding and that the market price of a publicly traded firm can itself be an accurate measurement of fair value.

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In Statutory Merger Appraisal Proceeding, Chancery Court, Using Discounted Cash Flow Analysis, Finds Fair Value of Shares to be Below Merger Transaction Price

By Eric E. Freedman and H. Corinne Smith

In In Re Appraisal of SWS Group, Inc., C.A. No. 10554-VCG (Del. Ch. May 20, 2017), the Delaware Court of Chancery, applying discounted cash flow analysis in a statutory appraisal proceeding, determined that the fair value of the stock of SWS Group, Inc. (“SWS”) at the time of its January 2015 merger was $6.38 per share. SWS stockholders had received a mix of cash and stock worth $6.92 per share in the merger transaction. As a result, the valuation determined by the Court in the appraisal proceeding represented a significant discount from the price paid in the merger.

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Chancery Court Dismisses Minority Stockholders’ Action Seeking Quasi-Appraisal in United Capital Corp. Buyout

By: Shoshannah Katz and Andrew Gahan

In In re United Capital Corp., Stockholders Litigation, C.A. No. 11619-VCMR (Del. Ch. Jan. 4, 2017), the Delaware Court of Chancery dismissed a suit brought by plaintiff minority stockholders (“Plaintiff”) that sought a quasi-appraisal to remedy alleged breaches of the duty of disclosure in connection with the acquisition of United Capital Corp. (“United Capital” or “Company”) via short-form merger.  The Court concluded that Plaintiff had not adequately alleged that any omitted information was material to the decision to seek appraisal and that the duty of disclosure was not violated.

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