M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Friday, July 12, 2013

Appraisal ... is it worth it?

For all this talk now flying around about somehow using the appraisal remedy as a free option in the Dell transaction for shareholders who hold to eke out more from the deal, I'll say wait a minute. Slow down.  First things first, pursuing an appraisal is not like heading down to the local pawn store and asking Chumlee "Hey, Chum, how much for my stock?"  

Even if it were that easy, everybody knows that Chumlee and his buddies aren't going to give you the highest price for your stock, just a fair price.  There's a big difference.

A recent opinion in the Delaware (well worth reading...Merion Capital v. 3M Cogent)  suggests how an appraisal could go down:

This is the post-trial decision in an appraisal brought pursuant to 8 Del. C. ยง 262 and arising out of a merger in which a global technology conglomerate and its acquisition subsidiary acquired a biometrics technology company at a price of $10.50 per share. Relying upon a discounted cash flow ("DCF") analysis, the petitioners claim that each share of the biometrics company's common shares was worth $16.26 as of the merger date. By contrast, the respondent contends that the biometrics company's common shares were worth only $10.12 apiece as of the merger date. For the reasons set forth below, the Court concludes that, as of the merger date, the fair value of the biometrics company was approximately $963.4 million or $10.87 per share.

Catch that?  The dissenting stockholders were looking for $16.26, the company argued that $10.12 was fair and in the end, the judge awarded the dissenters $10.87, just $0.37 more than the original merger consideration.  Geez, that's not even splitting the difference between the competing valuations!  Another thing with knowing  -- Merion took almost 3 YEARS to get to this point.  That's three years out of your life for an extra 37 cents per share.  That might be worth it to some investors, but not to many/any retail investors.

Anyway, I am neither for or against anyone pursuing their rights to an appraisal in connection with the Dell deal, just be aware it takes time and it might not even be all that valuable an option in the end.



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But where could you get prime plus 5% on your money compounded quarterly for the last three years? That isn't the worst thing in the world.

Posted by: Pete | Jul 12, 2013 8:45:49 AM

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