Deal Price or Fair Value?: Del. Courts Juggle Factors in Appraisal Cases
For the second time in as many months, the Delaware Court of Chancery has ruled that a company sold for more than it was worth, a warning sign for appraisal seekers as the Delaware Supreme Court appears poised to address the role of deal price in determining fair value.
July 25, 2017 at 08:06 PM
11 minute read
For the second time in as many months, the Delaware Court of Chancery has ruled that a company sold for more than it was worth, a warning sign for appraisal seekers as the Delaware Supreme Court appears poised to address the role of deal price in determining fair value.
Vice Chancellor J. Travis Laster on July 21 said that Sprint Corp. paid more than twice the fair value of Clearwire Corp. to purchase the telecommunications firm in 2013, after a bidding war propelled the deal price to $5 per share.
The ruling, outlined in a 97-page opinion, came as a stinging loss for Aurelius Capital Management, a hedge fund and former Clearwire shareholder, which exercised its appraisal rights after opposing the sale. Employing a discounted cash flow, or DCF, analysis Aurelius had argued that its shares in Clearwire—at the time, the country's largest private holder of wireless spectrum—was worth $16.08 per share when the deal closed in July 2013.
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