Stay current on changes and developments in corporate law with a wide variety of resources and tools.
Nine law school professors are asking the Delaware Supreme Court to simplify appraisal litigation by directing the state’s chancery court to defer to the transaction price when a deal is the product of arm’s-length negotiations ( DFC Global Corp. v. Muirfield Value Partners LP , Del., No. 518, 2016, motion to file brief 12/20/16 ).
The academics made the request in an appeal filed by Malvern, Pa.-based payday lender DFC Global Corp. over a chancery court ruling that found the company undervalued when it was acquired in 2014 by private equity firm Lone Star Funds.
“Without a clear rule directing courts to defer to a transaction price resulting from an arm’s-length auction, courts are left to cobble together a discounted cash flow model from the disparate proposals of the parties’ experts,” the professors said in a joint amicus filing in support of DFC Global. “Respectfully, however, judges are ill-equipped to undertake that task.”
The academics also argued that ignoring arm’s-length sale processes “imposes the prospect of costly and unpredictable appraisal litigation on all transactions, which distorts market behavior.”
The group includes Stephen Bainbridge, a law professor from the University of California, Los Angeles, who comments frequently on corporate governance in his Professor Bainbridge blog.
In the lawsuit, shareholders that collectively owned over 4.6 million DFC Global shares claimed the firm was sold at a discount for $9.50 per share.
In July, the chancery court ruled that the fair value of DFC Global at the time the transaction closed was $10.21 per share. After the court issued its opinion, DFC discovered an error in the court’s fair-value calculation. Although the court corrected the error, it still adhered to its original valuation.
In arguing for reversal, DFC said the chancery court’s decision would undermine confidence in Delaware appraisal actions.
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 firstname.lastname@example.org
Copyright © 2017 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 email@example.com.
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 firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)