Two decisions by the Delaware Court of Chancery in the past two weeks reached seemingly disparate outcomes on fair value for the companies involved, but together stand for the general trend of recent appraisal decisions that deal price is the best indicator of fair value if the price resulted from a fair and robust sale process. However, the court will rely on other methods to determine fair value if the record suggests that the process could not have resulted in a deal price that is a reliable indicator of fair value (for example, where there were board conflicts or other … Read more
Recently in In re Cyan, Inc. Stockholders Litigation, the Delaware Court of Chancery dismissed a fiduciary duty claim and a request for a quasi-appraisal remedy in connection with the acquisition of Cyan, Inc. by Ciena Corporation. Relying on principles of existing Delaware case law, the court held that the business judgment rule applied to the Cyan board’s decision to approve the mostly stock-for-stock merger, a holding further reinforced under the doctrine set forth in Corwin v. KKR Financial Holdings LLC because Cyan shareholders had voted to approve the deal. The shareholders alleged numerous board conflicts (including that certain directors were … Read more
In In re Books-A-Million, Inc. Stockholders Litigation, the Delaware Court of Chancery dismissed the fiduciary duty claims of former minority stockholders following a going-private, squeeze-out merger because the transaction satisfied the framework to invoke business judgment review as approved by the Delaware Supreme Court in Kahn v. M&F Worldwide Corp.
The plaintiffs brought fiduciary duty claims challenging the transaction pursuant to which the controlling stockholders of Books-A-Million, Inc. took the company private. The agreed price offered a premium to market, but was nevertheless lower than a competing offer from a third party to whom the controlling stockholders … Read more
In Larkin v. Shah, issued on August 25, the Delaware Court of Chancery dismissed a stockholder challenge to a merger due to the cleansing effect of fully informed stockholder approval, applying the Delaware Supreme Court’s recent Corwin v. KKR Financial Holdings LLC decision (which held that fully informed and uncoerced stockholder approval of a merger not subject to entire fairness review invokes the business judgment rule rather than heightened scrutiny under Revlon). The Larkin opinion confirms that, other than with respect to transactions to which entire fairness applies ab initio (i.e., transactions involving a conflicted controlling stockholder or group), … Read more
In Kallick v. SandRidge Energy, Inc., the Delaware Court of Chancery, in an opinion by Chancellor Strine, enjoined the incumbent board of SandRidge Energy, which faced a consent solicitation initiated by a large stockholder seeking to de-stagger and replace the board, from, among other things, soliciting against or otherwise impeding the consent solicitation until the board approved the rival slate for purposes of a “proxy put” provision in SandRidge’s credit agreements. The Kallick decision, along with the Court of Chancery’s earlier decision in San Antonio Fire & Police Pension Fund v. Amylin Pharmaceuticals, confirm that corporations, as a … Read more