The Delaware Court of Chancery has issued its original opinion in a consolidated appraisal action arising out of Verizon Communications Inc's 2015 acquisition of AOL Inc. In contrast to a recent string of Delaware appraisal decisions, the court determined that reliance on the $50 per share merger price for determining AOL's statutory fair value was not warranted.
Two Delaware appraisal decisions issued in 2018 illustrate that, following the Delaware Supreme Court's decisions in Dell and DFC, the Delaware courts remain willing to give substantial evidentiary weight to a deal price as an indicator of fair value where the underlying transaction is the product of an open process characterised by the objective indicia of reliability.
A recent decision applied the framework established by the Delaware Supreme Court in Kahn v M&F Worldwide Corp (MFW) and found that a merger transaction with a controlling private equity fund on both sides was entitled to business judgment review. The decision outlines the elements of the MFW roadmap and clarifies that its ab initio requirement requires only that the elements be in place prior to the commencement of negotiations.
The Delaware Court of Chancery has applied the standard established in In re MFW Shareholders Litigation and Kahn v M & F Worldwide Corporation in rejecting a challenge to a controlling stockholder's buyout of the remaining shares of Books-A-Million, Inc from minority stockholders. The court confirmed the framework to be followed by Delaware companies and controlling stockholders that seek to avoid the 'entire fairness' standard of review.
The New York Court of Appeals recently issued a decision that narrowly interprets the scope of the common interest exception to attorney-client privilege. Following the decision, parties involved in M&A transactions subject to New York law must take care to understand the situations in which the courts will consider litigation to be "pending or reasonably anticipated", in order to avoid inadvertent waivers of privilege when sharing communications with other parties to the transaction.
The Delaware Court of Chancery recently held that the acceptance of a tender offer by the majority of a company's stockholders will have the same cleansing effect as the approval of a merger. Therefore, if a majority of disinterested and fully informed stockholders have accepted a tender offer, the courts will apply business judgement review when examining board decisions.
The Corporation Law Council of the Corporation Law Section of the Delaware State Bar Association recently released new proposed amendments to the Delaware General Corporation Law that address appraisal arbitrage, which has become an increasing phenomenon in recent years. The proposed amendments have now passed the Delaware legislature and, if signed into law as expected, will become effective as of August 1.
In deciding what it characterised as an issue of "first impression", the Delaware Chancery Court recently held a fee-shifting bylaw to be inapplicable due to the timing of the bylaw's adoption. The court took care to emphasise that it was not called on to decide broader issues involving the bylaw's application, including the "serious policy questions implicated by fee-shifting bylaws in general".