Delaware Supreme Court Affirms Court Of Chancery Appraisal Determination At Nearly 60% Discount To Deal Price
05/01/2018On April 23, 2018, the Supreme Court of Delaware affirmed a decision by Vice Chancellor J. Travis Laster of the Delaware Court of Chancery appraising the shares of Clearwire Corporation at $2.13 per share, notwithstanding that Clearwire was acquired for $5.00 per share. ACP Master, Ltd., et al. v. Sprint Corporation, et al. & ACP Master, Ltd., et al. v. Clearwire Corporation, C.A. No. 8508-VCL, C.A. No. 9042-VCL (Del. Apr. 23, 2018). As discussed in our post regarding that decision, stockholder petitioners had challenged the merger of Clearwire with Sprint Nextel Corporation, alleging that Sprint had been a controlling shareholder of Clearwire prior to the transaction and had breached its fiduciary duties during merger negotiations. Petitioners also sought appraisal, asserting that the $5.00 deal price substantially undervalued their shares. As we highlighted previously, the Court of Chancery found no breach of fiduciary duties even under an entire fairness standard and determined that fair value of the shares amounted to $2.13, even though that price reflected nearly a 60% discount to the deal price. With regard to the breach claims, the Court of Chancery concluded that instances of unfair dealing in an early phase of the process were “render[ed] immaterial” in light of subsequent arm’s-length negotiations and “overwhelming evidence” that the final deal price was fair. As to the appraisal finding, the Court of Chancery explained that the appraisal statute requires the exclusion of “any synergies present in the deal price” and was persuaded by the discounted cash flow analysis offered by defendants’ expert. The Delaware Supreme Court, sitting en banc, affirmed without issuing an opinion.