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A Trial Win Sets Precedent for Valuation in M&A Transactions

McCarter team Mike Kelly, Steven Wood and Andrew Dupre prevailed in a trial that will have far-reaching implications for how Delaware companies should be valued in a M&A transaction. We represented HP, Inc., in a valuation case brought by hedge funds Verition Partners Master Fund Ltd. and Verition Multi-Strategy Master Fund Ltd.  Verition bought over 2 million shares of Aruba Networks after HP had announced it was going to purchase Aruba. Verition disputed the $24.67 per share valuation of the stock at the deal’s closing and filed an appraisal proceeding, arguing that the fair value was $32.57 according to its expert. After hearing the evidence presented at trial and reviewing extensive post-trial briefing, Vice Chancellor J. Travis Laster accepted our argument that great weight should be given to the 30-day market price of its stock at the time of the merger. His conclusion valued the shares at $17.13, representing an $18 million loss for Verition. 

This ruling took into account two recent Delaware Supreme Court opinions, Dell and DFC. Together the three rulings set the standard that the unaffected market price of a company and the deal price of a merger should be given great weight when determining the "fair value" of shares in the context of an M&A transaction. This will likely reduce the cost of M&A deals, as public companies should now give less weight to a "judicial tax" to cover appraisal litigation that dissenting shareholders might bring.

Click to read Law360 article "Aruba Share Payout Cut 30% In $2.8B HP Tie-up Appraisal."

Click to read Bloomberg Technology article "Aruba Networks Investors Sue for More in HP Deal, End up with a Lot Less."