Key Appraisal Case to Be Heard by Delaware High Court

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By Michael Greene

The Delaware Supreme Court June 7 will hear oral argument in a closely watched appraisal case that could provide more guidance on how such lawsuits will be decided ( DFC Global Corp. v. Muirfield Value Partners LP, Del., No. 518, 2016, oral argument 6/7/17 ).

Under Delaware law, shareholders that choose not to participate in a merger can file appraisal actions asking the Delaware Chancery Court to assess a “fair value” for their shares. This will be the first appraisal case heard by the Delaware Supreme Court since 2015.

Malvern, Pa.-based payday lender DFC Global Corp. is appealing a chancery court ruling that found the company was undervalued when it was acquired in 2014 by private equity firm Lone Star Fund.

Although it agreed that the price was negotiated at arm’s length, the chancery court concluded that the transaction price wasn’t the best indicator of fair value because the deal was struck “during a period of significant company turmoil and regulatory uncertainty.”

Amicus Filings

Whether the state high court should adopt a categorical rule requiring the chancery court to defer to the transaction price when a deal is the product of arm’s-length negotiations has been controversial. Groups of academics have filed amicus briefs on both sides of the issue.

The shareholders are represented by Grant & Eisenhofer PA. DFC Global is represented by Gibson, Dunn & Crutcher LLP.

To contact the reporter on this story: Michael Greene in Washington at mGreene@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com

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