Right to appraisal in Delaware. A stockholder of a Delaware corporation who objects to the price to be paid in a proposed all-cash merger can petition the Court of Chancery to determine the “fair value” of his or her shares, so long as the stockholder has not voted for the merger or accepted the consideration paid in the merger and has complied with certain procedural requirements. The court will determine the value of all such “dissenting shares,” based on the going concern value of the company immediately prior to the closing of the merger. The court can determine appraised fair value using any methodologies it chooses. The statutory proscriptions are only that the court (1) must consider “all relevant factors” and (2) cannot include any value that “arises from the merger” itself. The parties “share” the burden of proof, meaning that, as a practical matter, as the court has acknowledged, the burden is on the court to determine fair value.
Apparent uncertainty of the result in appraisal cases. Appraisal has been characterized by one Delaware law commentator as “a crap-shoot.” In our review of the appraisal decisions issued by the Court of Chancery from 2010 through September 2016, the appraisal award has varied from the merger price (not including statutory interest on the award) by amounts ranging from 14.5 percent below the merger price to 258 percent above the merger price (with an average premium above the merger price of 45 percent).
