Yesterday, the Delaware Supreme Court issued its decision in Dell v. Magnetar Global, in which it reversed the Chancery Court’s 2016 ruling in the Dell appraisal proceeding. Here’s an excerpt from this Potter Anderson memo summarizing the Supreme Court’s decision:
In this unanimous en banc decision, the Supreme Court of Delaware held that the Court of Chancery erred in giving no weight to Dell’s pre-deal stock price or the deal price when determining the fair value in this appraisal proceeding. In the Court’s view, “the market-based indicators of value – both Dell’s stock price and deal price – have substantial probative value” and “deserved heavy, if not dispositive, weight.”
Thus, once again giving a nod to the deal price, the Court cautioned the Court of Chancery to “be chary about imposing the hazards that always come when a law-trained judge is forced” to rely on discounted cash flow (DCF) analyses and “divergent partisan expert testimony.”
The Supreme Court observed that Dell’s sale process had many mechanisms designed to “ensure stockholders obtain the highest possible value.” It further concluded that “the trial court’s decision to give no weight to any market-based measure of fair value runs counter to its own factual findings.”
The Supreme Court’s emphasis on the significance of a deal price obtained through a sound process in determining “fair value” echoes the rationale underlying its decision earlier this year in DFC Global, and is consistent with a broader trend in Delaware appraisal cases toward increased deference to the deal price under these circumstances.
– John Jenkins