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Dell, Inc. v. Magnetar Global Event Driven Master Fund Ltd.

Supreme Court of Delaware

September 27, 2017, Submitted; December 14, 2017, Decided

No. 565, 2016

Opinion

 [*5]  VALIHURA, Justice:

The petitioners left standing in this long-running appraisal saga are former stockholders of Dell Inc. ("Dell" or the "Company") who validly exercised their appraisal rights instead of voting for a buyout led by the Company's founder and CEO, Michael Dell, and affiliates of a private equity firm, Silver Lake Partners ("Silver Lake"). In perfecting their appraisal rights, petitioners acted on their belief that Dell's shares were worth more than the deal price of $13.75 per share—which was already a 37% premium to the Company's ninety-day-average unaffected stock price.

] Our appraisal statute, [**3]  8 Del. C. § 262, allows stockholders who perfect their appraisal rights to receive "fair value" for their shares as of the merger date instead of the merger consideration. The appraisal statute requires the Court of Chancery to assess the "fair value" of such shares and, in doing so, "take into account all relevant factors." The trial court complied: it took into account all the relevant factors presented by the parties in advocating for their view of fair value—including Dell's stock price and deal price—and then arrived at its own determination of fair value.

The problem with the trial court's opinion is not, as the Company argues, that it failed to take into account the stock price and deal price. The trial court did consider this market data. It simply decided to give it no weight. But the court nonetheless erred because its reasons for giving that data no weight—and for relying instead exclusively on its own discounted cash flow ("DCF") analysis to reach a fair value calculation of $17.62—do not follow from the court's key factual findings and from relevant, accepted financial principles.

] "When reviewing a decision in a statutory appraisal, we use an abuse of discretion standard and grant significant [**4]  deference to the factual findings of the trial court. This Court 'will accept [the Court of Chancery's] findings if supported by the record . . . .'"2 We defer to the trial court's fair value determination if it has a "reasonable basis in the record and in  [*6]  accepted financial principles relevant to determining the value of corporations and their stock."3

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177 A.3d 1 *; 2017 Del. LEXIS 518 **; 2017 WL 6375829

DELL, INC., Respondent-Below, Appellant/Cross-Appellee, v. MAGNETAR GLOBAL EVENT DRIVEN MASTER FUND LTD; MAGNETAR CAPITAL MASTER FUND LTD; GLOBAL CONTINUUM FUND, LTD; SPECTRUM OPPORTUNITIES MASTER FUND LTD.; MORGAN STANLEY DEFINED CONTRIBUTION MASTER TRUST; BLACKWELL PARTNERS LLC; AAMAF, LP; WAKEFIELD PARTNERS, LP; CSS, LLC; MERLIN PARTNERS, LP; WILLIAM L. MARTIN; TERENCE LALLY; ARTHUR H. BURNET; DARSHANAND KHUSIAL; DONNA H. LINDSEY; DOUGLAS J. JOSEPH ROTH CONTRIBUTORY IRA; DOUGLAS J. JOSEPH & THUY JOSEPH, JOINT TENANTS; GEOFFREY STERN; JAMES C. ARAMAYO; THOMAS RUEGG; CAVAN PARTNERS LP; and RENE A. BAKER, Petitioners-Below, Appellees/Cross-Appellants.

Subsequent History: Case Closed January 2, 2018

Prior History:  [**1] Court Below: Court of Chancery of the State of Delaware. Consolidated C.A. No. 9322-VCL.

In re Appraisal of Dell Inc., 2016 Del. Ch. LEXIS 81 (Del. Ch., May 31, 2016)

Disposition: Upon appeal from the Court of Chancery. REVERSED in part, AFFIRMED in part, and REMANDED.

CORE TERMS

fair value, trial court, appraisal, shares, stockholders, go-shop, valuation, per share, merger, bidders, billion, buyers, stock, bid, tax rate, strategic, projections, stock price, earnings, expenses, Buyout, parties, reasons, curse, investors, analysts, winner's, repatriation, effective, deduct

Business & Corporate Law, Shareholder Actions, Appraisal Actions & Dissent Rights, Fair Market Value, Corporations, Appraisal Actions & Dissent Rights, Civil Procedure, Appeals, Standards of Review, Abuse of Discretion, Evidence, Burdens of Proof, Preponderance of Evidence, Judicial Officers, Judges, Discretionary Powers