In several recent statutory appraisal actions, the Delaware Court of Chancery has concluded that the fair value of the corporation was equal to the agreed-upon deal price. However, in one recent appraisal action, Chancellor Andre G. Bouchard rejected the defendant corporation’s argument that the merger consideration could be “relied upon by the court to set the appraisal value.” In Dunmire v. Farmers & Merchants Bancorp of Western Pennsylvania, C.A. No. 10589-CB (Nov. 10), the court found that the merger of the corporation, a small community bank referred to as F&M, into another community bank, NexTier Inc., “was not the product of a robust sale process.” Both corporations were controlled by a single family, the Snyders, and the merger was effected at their “instance.” No other bidders were considered. A special committee was formed, but two of its three members had business ties to the Snyder family, and the third, a member of the Dunmire family, who were holders of approximately 18 percent of F&M’s stock, voted against the merger. For those reasons, the court concluded that the merger consideration was not a “reliable determinant of fair value.”
The merger was a stock-for-stock transaction, with an exchange ratio of one NexTier share for 2.17 F&M shares, resulting in implied values of $83 per share for F&M and $180 per share for NexTier. F&M had 767,799 shares outstanding at the time of the merger. The merger consideration for F&M was equivalent to approximately $63.7 million in cash. The petitioners’ expert, Joseph L. Hopkins, valued F&M at $137.97 per share, or approximately $105.9 million, while F&M’s expert, Daniel R. Van Vleet, valued it at $76.45 per share, or approximately $58.7 million. The court concluded that the fair value of F&M was $91.90 per share, or $70,564,156, exceeding the merger price by approximately $6.9 million, or 10.8 percent.
