July 17, 2013

Another Appraisal Opinion

John Grossbauer of Potter Anderson notes: Last week, Delaware Vice Chancellor Parsons issued this opinion in Merion Capital v. 3M Cogent. The Court in this case awarded petitioners $10.87 per share as the fair value determined under Section 262, compared with a merger price of $10.50. Petitioners had argued for a value of $16.26, and the company had argued for a value of $10.12. In the opinion, the Vice Chancellor gave no weight to the negotiated merger price, citing the Supreme Court’s Golden telecom opinion and the relevant facts. He also gave no weight to the company’s comparable transactions and comparable companies analyses, finding them unreliable here given, among other things, small sample sizes. He then engaged in a detailed and substantive analysis of the competing DCF analyses. Among other things, he discussed the use of management projections, finding them more reliable here than plaintiff’s proffered cash flow numbers. Finally, the Court rejected the argument that interest should not be awarded because petitioners bought their shares after the announcement of the merger and because of alleged delay in prosecution of the appraisal action.