Bloomberg BNA’s Corporate Law & Accountability Report is available on the Corporate Law Resource Center. This news service keeps corporate practitioners informed of legal developments of...
July 8 — Alternative consumer financial services provider DFC Global Corp. shares were undervalued when the company was acquired by private equity firm Lone Star Funds for $366 million, the Delaware Chancery Court ruled July 8 ( In re DFC Glob. Corp. , 2016 BL 219857, Del. Ch., No. 10107-CB, 7/8/16 ).
In a lawsuit, shareholders that collectively owned over 4.6 million shares claimed that the payday lender was sold at a discount for $9.50 per share.
Chancellor Andre G. Bouchard, by equally weighing three metrics—a discounted cash flow model, a comparable company analysis and the transaction price—concluded that the fair value of DFC Global at the time the transaction closed was $10.21 per share.
The court found that on their own, the transaction price and the valuation methods weren't the best indicators of fair value because the deal was struck “during a period of significant company turmoil and regulatory uncertainty.”
According to the court's decision, DFC, which had more than 1,500 stores worldwide, entered into its deal with Lone Star in 2014 against a backdrop of potential new rules and regulations from the Consumer Financial Protection Bureau in the U.S. and the Financial Conduct Authority in the U.K.
“Although this Court frequently defers to a transaction price that was the product of an arm’s-length process and a robust bidding environment, that price is reliable only when the market conditions leading to the transaction are conducive to achieving a fair price,” Bouchard wrote. “Similarly, a discounted cash flow model is only as reliable as the financial projections used in it and its other underlying assumptions.”
To contact the reporter on this story: Michael Greene in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Yin Wilczek at email@example.com
The opinion is available at http://src.bna.com/gDV.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)