Del. Supreme Court Affirms §262 Ruling; Merger Price Most Probative of Fair Value

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...

Feb. 17 — The Delaware Supreme Court summarily affirmed the Delaware Chancery Court's 2014 ruling that a shareholder cannot be compelled to accept prepayment of a stock-appraisal award so that the interest on that prepaid amount does not continue to accrue.

In a February 2014 decision, Vice Chancellor Sam Glasscock III denied a request by CKx to compel the petitioning shareholder to accept the tender offer of an undisputed portion of the fair value of the petitioner's shares.

After CKx was sold to Apollo Global Management LLC in 2011 at $5.50 per share, Huff Fund Investment brought a statutory appraisal action under § 262 of the Delaware General Corporation Law, wherein stockholders are entitled to receive the court-determined “fair value” of their shares, which excludes any value that arises as a consequence of the merger.

To determine fair value, under §262, the chancery court will consider “all relevant factors,” but the Delaware Supreme Court has said that it may not presumptively favor the merger price.

Nonetheless, the chancery court concluded—and the supreme court affirmed Feb. 12—that the price paid in a third-party arms' length merger was the most probative evidence of fair value.

This affirmance follows a recent chancery court award of the merger price as fair value. In that case, Delaware Chancery Court's Sam Glasscock III opined on the difficulty a bench judge faces in determining the fair value of company in light of an auction sale.

The opinion is available at http://courts.delaware.gov/opinions/download.aspx?ID=219230.