Stay current on changes and developments in corporate law with a wide variety of resources and tools.
PetSmart Inc. investors couldn’t convince the Delaware Chancery Court that their shares were undervalued in the company’s $8.7 billion going-private transaction in 2015 ( In re Appraisal of PetSmart Inc. , 2017 BL 177567, Del. Ch., No. 10782-VCS, 5/26/17 ).
The parties’ merger price was the best indicator of the fair value of the Phoenix-based retailer of pet products and services, Vice Chancellor Joseph Slights III ruled May 26.
The 109-page decision provides more clarity as to when the chancery court will defer to the parties’ negotiated price, as opposed to using other valuation methods to determine a company’s value.
A consortium of funds led by BC Partners Inc. acquired PetSmart in March 2015 for $83 per share. Stockholders who collectively owned over 10.7 million shares claimed the company should have been valued at $128.78 per share.
Under Delaware law, shareholders that choose not to participate in a merger can file appraisal lawsuits asking the chancery court to assess a “fair value” for their shares.
Over the last five years, there has been an increase in appraisal actions, according to Bloomberg Law data. There have been 22 such lawsuits filed as of mid-April challenging 11 deals. There were 77 appraisal lawsuits filed in 2016 challenging 48 deals, compared to 51 lawsuits in 2015 challenging 33 deals.
Slights said that while PetSmart’s sales process wasn’t perfect, it “came close enough to perfection to produce a reliable indicator” of the company’s value.
“Accepting Petitioners’ contention that the fair value of PetSmart was $128.78 per share would be tantamount to declaring that a massive market failure occurred here that caused PetSmart to leave nearly $4.5 billion on the table,” Slights said. “In the wake of a robust pre-signing auction among informed, motivated bidders, and in the absence of any evidence that market conditions impeded the auction, I can find no basis to accept Petitioners’ flawed, post-hoc valuation and ignore the deal price.”
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)