# Cede v. Technicolor

• The Foundations of Delaware Corporate Law: Cede v. Technicolor

大変興味深く拝見しました。

• Cede & Co. v. Technicolor, Inc., 542 A.2d 1182 (Del. 1988) (“Technicolor I”)
• Cede & Co. v. Technicolor, Inc., 634 A.2d 345 (Del. 1993), modified, 636 A.2d 956 (Del. 1994) (“Technicolor II”)
• Cinerama, Inc. v. Technicolor, Inc., 663 A.2d 1156 (Del. 1995) (“Technicolor III”)
• Cede & Co. v. Technicolor, Inc., 684 A.2d 289 (Del. 1996) (“Technicolor IV”)
• Cede & Co. v. Technicolor, Inc., 758 A.2d 485 (Del. 2000) (“Technicolor V”)
• Cede & Co. v. Technicolor, Inc., 884 A.2d 26 (Del. 2005) (“Technicolor VI”)

# Kruse v. Synapse Wireless, Inc., 2020 Del. Ch. LEXIS 238 (Del. Ch. July 14, 2020)

John Jenkins writes:

In many respects, the case presented a worst case scenario – it involved a minority squeeze-out of a private company at a price of approximately $0.43 per share with no market check or competitive sales process. Both parties pointed to valuation analyses prepared by their competing experts, which resulted in wildly divergent valuations. The petitioner’s expert opined that each Synapse share was worth$4.1876 at the time of transaction, while Synapse’s expert provided a valuation range of $0.06 to$0.11 per share. Vice Chancellor Slights acknowledged that this left him in a bind:

… As a result, with the exception of relatively minor adjustments to Synapse’s expert’s conclusions about the amount of its debt and available cash, the Vice Chancellor adopted that expert’s approach to the DCF analysis and concluded that the fair market value of the company’s shares was approximately $0.23 per share – nearly 50% below the purchase price. # Fir Tree Value Master Fund, LP v. Jarden Corp., 2020 WL 3885166, 2020 Del. LEXIS 237 (Del. July 9, 2020) • Fir Tree Value Master Fund, LP v. Jarden Corp., 2020 WL 3885166, 2020 Del. LEXIS 237 (Del. July 9, 2020) On appeal, the petitioners argue the Court of Chancery erred as a matter of law when it adopted Jarden’s unaffected market price as fair value because it ignored what petitioners claim is a “long-recognized principle of Delaware law” that a corporation’s stock price does not equal its fair value. They also claim that the court abused its discretion by refusing to give greater weight to a discounted cash flow analysis populated with data selected by petitioners, ignoring market-based evidence of a higher value, and refusing to use the deal price as a “floor” for fair value. We affirm the Court of Chancery’s judgment finding$48.31 as the fair value of each share of Jarden stock as of the date of the merger. There is no “long-recognized principle” that a corporation’s unaffected stock price cannot equate to fair value. Although it is not often that a corporation’s unaffected market price alone could support fair value, the court here did consider alternative measures of fair value—a comparable companies analysis, market-based evidence, and discounted cash flow models—but ultimately explained its reasons for not relying on that evidence. Finally, Jarden’s sale price does not act as a valuation floor when the petitioners successfully convinced the court that the deal price resulted from a flawed sale process, and the court found Jarden probably captured substantial synergies in the sale price.

When a market is informationally efficient in the sense that the market’s digestion and assessment of all publicly available information concerning a company is quickly impounded into the company’s stock price, the market price is likely to be more informative of fundamental value. And how informative of fundamental value an informationally efficient market is depends, at least in part, on the extent of material nonpublic information. It is a traditional Delaware view that in some cases the price a stock trades at in an efficient market is an important indicator of its economic value and should be given weight.

# Scott Callahan, Darius Palia & Eric L. Talley, Appraisal Arbitrage and Shareholder Value, 3 J. L. Fin. & Accounting, 147 (2018)

• Scott Callahan, Darius Palia & Eric L. Talley, Appraisal Arbitrage and Shareholder Value, 3 J. L. Fin. & Accounting, 147 (2018)

This paper considers the question of whether the 2007 reforms had the negative repercussions that critics lament, both from theoretical and empirical perspectives. Theoretically, we extend the auction-design framework developed in Choi and Talley (2017) to derive a series of comparative statics related to observable factors concerning M&A transactions and target shareholder welfare. Using this model, we demonstrate that a credible threat of an appraisal action can sometimes constitute a valuable vehicle for augmenting shareholder value, whereby the specter of later appraisal value acts as a credible type of “reserve price” in a company auction. … More significantly, our model delivers testable empirical predictions relating to how “shocks” to the appraisal remedy affect expected shareholder value. In particular, we show that under plausible assumptions as to the status quo ante, a liberalizing shock to appraisal will lead to enhanced target shareholder welfare if it is accompanied by an increase in expected merger premia for appraisal eligible deals.

We then test this (and related) predictions empirically using the 2007 reforms as an appraisal-liberalizing shock. First, we demonstrate (consistent with our model) that deal premia are discernibly higher in appraisal eligible transactions (even when one accounts for the tax status of the deal). Second, we use a difference-in-differences specification to consider the combined effects of the 2007 shocks (Transkaryotic and the amendment of DGCL 262(h)) on deal premia for appraisal-eligible acquisition (using appraisal-ineligible deals as 4Formally, this condition also requires the assumption that under the status quo ante, a control). We find consistent evidence that the liberalizing 2007 shocks were followed by significant increases in premia associated with appraisal eligible deals relative to the control group.

# Manichaean Capital v. SourceHOV Holdings, 2020 Del. Ch. LEXIS 38 (Del. Ch. Jan. 30, 2020)

In fulfilling the statutory mandate to account for “all relevant factors” bearing on “fair value,” Delaware courts consider a range of evidence that often includes (i) “market evidence,” such as a company’s unaffected trading price or the “deal price” following an appropriate “market check” and (ii) “traditional valuation techniques,” such as a comparable company, comparable transaction or DCF analysis. In this case, however, the parties and their experts agree that the circumstances surrounding the Business Combination disqualify market evidence as reliable inputs for a fair value analysis. Accordingly, the valuation presentation from both sides focused on DCF. In my view, that focus was well placed.

SourceHOV’s deal process (or lack thereof) undermines any reliance on deal price as an indicator of fair value. Moreover, as a private company, SourceHOV’s equity was not traded in an efficient market, so its unaffected market price is also an unreliable indicator of fair value. Without reliable market evidence of fair value, the parties were left to focus on “traditional valuation methods” to appraise SourceHOV. This, of course, places the spotlight squarely on their competing valuation experts. In other words, as I see it, this case has played out as the quintessential “battle of the experts.”

Both experts agree there are no sufficiently comparable companies or transactions with which to perform either a trading multiples or a transaction multiples analysis. Given that other valuation techniques do not fit here, both experts also agree that a DCF analysis is the only reliable method to calculate SourceHOV’s fair value. In light of the experts’ agreement, and seeing no reason to disagree, I am satisfied that a DCF analysis is the only reliable indicator of SourceHOV’s fair value. (footnotes omitted)

# In re Appraisal of Panera Bread Company

In re Appraisal of Panera Bread Company, 2020 Del. Ch. LEXIS 42 (Jan. 31, 2020) (Zurn, V.C.)

In this appraisal action, I must determine the fair value of each share of the subject company on the closing date of its acquisition. I find that the process by which the company was sold bore several objective indicia of reliability, which were not undermined by flaws in that process. I therefore find that the deal price is persuasive evidence of fair value, and give no weight to other valuation metrics. I deduct some synergies, but find others were not adequately proven. I undergo that synergies analysis solely to fulfill my statutory mandate, rather than to effectuate any transfer of funds between the parties, because the company prepaid the entire deal price and has no recourse for a refund under the appraisal statute.

via Columbia, S&C,

# In re Appraisal of Jarden Corporation

Lowenstein Sandler writes:

By a July 19, 2019 ruling, Vice Chancellor Slights set the fair value of Jarden Corporation at its unaffected market price of $48.31, below the$59.21 per share value of cash and stock that Newell Rubbermaid had paid to acquire it. The court also performed a DCF analysis that corroborated its valuation. The court was critical of the merger process leading up to this deal and questioned the reliability of a merger-price-less-synergies approach given that factor as well as its findings that there was no pre-signing or post-signing market check and the evidence regarding deal synergies and how much, if at all, was received by Jarden, was conflicting and especially difficult to measure.

# 株式買取請求権と株価——Verition Partners v. Aruba Networks, 2019 Del. LEXIS 197 (Del. Apr. 16, 2019)

In this statutory appraisal case, the Court of Chancery found that the fair value of Aruba Networks, Inc., as defined by 8 Del. C. § 262, was $17.13 per share, which was the thirty-day average market price at which its shares traded before the media reported news of the transaction that gave rise to the appellants’ appraisal rights. … Because the Court of Chancery’s decision to use Aruba’s stock price instead of the deal price minus synergies was rooted in an erroneous factual finding that lacked record support, we answer that in the positive and reverse the Court of Chancery’s judgment. On remand, the Court of Chancery shall enter a final judgment for the petitioners awarding them$19.10 per share, which reflects the deal price minus the portion of synergies left with the seller as estimated by the respondent in this case, Aruba. …