In Delaware Court of Chancery Chancellor Andre G. Bouchard’s first opinion in an appraisal action, issued June 17 in Owen v. Cannon, C.A. No. 8860-CB (Del. Ch. June 17, 2015), he awarded the stockholder plaintiff nearly $16 million more for his shares than the merger consideration. The opinion follows recent decisions crediting and utilizing for valuation purposes management projections created in the ordinary course of business pre-merger, and declining to utilize projections developed in connection with litigation. At the same time, the decision stands in contrast to several recent appraisal decisions in which the court has concluded that the merger price was the fair price for the stockholder plaintiff’s shares.

The appraisal action was brought by Nathan Owen, who at the time of the merger was the largest stockholder of Energy Services Group Inc., a closely held company sold in May 2013. The merger was orchestrated by ESG’s two other large shareholders, Lynn Cannon and Bryn Owen, who voted to approve the merger over the stockholder plaintiff’s objection and after giving him just one-day notice of a special board meeting at which the merger was approved. Cannon had replaced Nathan Owen as ESG’s president in 2009, but the company continued making significant profit distributions to Owen after he no longer had a day-to-day role at the company. In fact, Cannon testified that he was interested in effecting the merger quickly in order “to stop the hemorrhage” of these distributions paid to Owen.

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