Fernan Restrepo, Judicial Deference, Procedural Protections, and Deal Outcomes in Freezeout Transactions: Evidence from the Effect of MFW

This work next explores the effect of MFW on the gains of the target shareholders, as measured by the premium over market prices, the cumulative abnormal returns around the announcement of the transaction, and the change from the buyer’s first offer to the final offer. This part of the analysis considers two hypotheses. The first hypothesis predicts that the gains of the target should be higher after MFW because shareholder voting acts as a check against negligent or captured boards, and even if boards discharged appropriately their fiduciary duties, the target shareholders can still use the threat of a veto to push acquirers to raise their offer (Subramanian, 2005, 15; Edelman and Thomas, 2015, 468; Jiang, Li, and Mei, 2016). As a result, the fact that MFW effectively incentivized MOM conditions should lead to an upward pressure on deal prices. The second hypothesis suggests, in contrast, that the target gains should remain similar after MFW because freezoeuts were already subject to significant scrutiny before 2013, and judicial scrutiny appears to be an effective substitute for procedural protections (Subramanian, 2007; Restrepo, 2013; Restrepo and Subramanian, 2015). As discussed in Section 4, the results generally support this hypothesis.

In RE Appraisal Of AOL Inc.

This is an important case for its comments on the Dell decision of the Delaware Supreme Court. The Court declined to use the deal price as evidence of the fair value despite the favorable comments on the use of deal price in Dell. Hence, this may mean that some commentators are wrong in their views that deal price is conclusive in valuation cases in the Delaware courts. Note, however, that again the fair value determined by the Court is less than the deal price, a loss for petitioners.

The decision is also important for its review of when the “operative reality” of a company includes the value of a new deal not yet concluded but sufficiently certain that its value needs to be part of the fair value of the company.

via Morris James

Fried Frank, The Appraisal Landscape: Key Points, Open Issues, and Practice Points

 2017年のデラウェア州最高裁による株式買取請求権に関する2つの事件(DFC GloblとDell)に関する法律事務所のメモランダムです。著者の一人であるScott Luftglass氏とは、Davis Polk時代に一緒に働いたことがあります。典型的な訴訟弁護士で、訴訟弁護士は、事務屋よりも緻密だと感じました。今回の記事もよく纏まっています。

via Harvard

Can Delaware Be Dethroned?

Delaware is the state of incorporation for almost two-thirds of the Fortune 500 companies, as well as more than half of all companies listed on the New York Stock Exchange, NASDAQ, and other major stock exchanges. This gives Delaware a seemingly unchallengeable position as the dominant producer of US corporate law. In recent years, however, some observers have suggested that Delaware’s competitive position is eroding. Other states have long tried to chip away at Delaware’s position, and recent Delaware legal developments may have strengthened the case for incorporating outside Delaware. More important, however, the federal government increasingly is preempting corporate governance law. The contributors to this volume are leading academics and practitioners with decades of experience in Delaware corporate law. They bring together a variety of perspectives that collectively provide the reader with a broad understanding of how Delaware achieved its dominant position and the threats it faces.

Key Delaware Corporate and Commercial Decisions for 2017

2017年のデラウェア州の重要判例について、Francis Pileggi氏が纏めています

デラウェア州最高裁判所による株式買取請求権に関するDell判決などは、既に十分有名なために省略されているようです。代わりに、Dellに関する法律事務所のメモランダムとして、Paul WeissSullivan & CromwellCleary Gottlieb Richards, Layton & Fingerのメモランダムへのリンクを掲げておきます。

採り上げられている判決は、次の通りです。

デラウェア州最高裁

デラウェア州衡平法裁判所

Dell, Inc. v. Magnetar Global Event Driven Master Fund Ltd., 2017 Del. LEXIS 518 (Del. Dec. 14, 2017)

By instructing the court to “take into account all relevant factors” in determining fair value, the statute requires the Court of Chancery to give fair consideration to “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court.” Given that “[e]very company is different; every merger is different,” the appraisal endeavor is “by design, a flexible process.”

This Court has relied on the statutory requirement that the Court of Chancery consider “all relevant factors” to reject requests for the adoption of a presumption that the deal price reflects fair value if certain preconditions are met, [*40] such as when the merger is the product of arm’s-length negotiation and a robust, non-conflicted market check, and where bidders had full information and few, if any, barriers to bid for the deal.

… Further, the Court of Chancery’s analysis ignored the efficient market hypothesis long endorsed by this Court. It teaches that the price produced by an efficient market is generally a more reliable assessment of fair value than the view of a single analyst, especially an expert witness who caters her valuation to the litigation imperatives of a wellheeled client.

… Fair value entails at minimum a price some buyer is willing to pay—not a price at which no class of buyers in the market would pay.

When an asset has few, or no, buyers at the price selected, that is not a sign that the asset is stronger than believed—it is a sign that it is weaker. This fact should give pause to law-trained judges who might attempt to outguess all of these interested economic players with an actual stake in a company’s future. This is especially so here, where the Company worked hard to tell its story over a long time and was the opposite of a standoffish, defensively entrenched target as it approached the sale process free of many deal-protection devices that may prevent selling companies [*73] from attracting the highest bid. Dell was a willing seller, ready to pay for credible buyers to do due diligence, and had a CEO and founder who offered his voting power freely to any topping bidder.

(footnotes omitted)

via Wachtell Lipton

DFC Global Decided

The respondent argues that we should establish, by judicial gloss, a presumption that in certain cases involving arm’s-length mergers, the price of the transaction giving rise to appraisal rights is the best estimate of fair value. We decline to engage in that act of creation, which in our view has no basis in the statutory text, which gives the Court of Chancery in the first instance the discretion to “determine the fair value of the shares” by taking into account “all relevant factors.”

… [W]e do not share DFC’s confidence in our ability to craft, on a general basis, the precise pre-conditions that would be necessary to invoke a presumption of that kind. We also see little need to do so, given the proven record of our Court of Chancery in exercising its discretion to give the deal price predominant, and indeed exclusive weight, when it determines, based on the precise facts before it that led to the transaction, that the deal price is the most reliable evidence of fair value. …

… Although there is no presumption in favor of the deal price, under the conditions found by the Court of Chancery, economic principles suggest that the best evidence of fair value was the deal price, as it resulted from an open process, informed by robust public information, and easy access to deeper, non-public information, in which many parties with an incentive to make a profit had a chance to bid. . .