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Tri-Continental Corp. v. Battye

Tri-Continental Corp. v. Battye

Supreme Court of Delaware

June 8, 1950, Decided

No Number in Original

Opinion

 [***525]   [*72]  WOLCOTT, Judge, delivering the opinion of the court:

Section 61 of the General Corporation Law, Revised Code 1935, § 2093, ] provides that upon the merger of a corporation, stockholders who object to the merger and who fulfill the statutory requirements to register their objection shall be paid the value of their stock on the date of the merger, exclusive of any element of value arising from the expectation or accomplishment of [**3]  the merger. The meaning of the word "value" under this section of the corporation law has never been considered by this court.  However, the Court of Chancery has on several occasions applied a definition of value under the section. This definition was first formulated in Chicago Corporation v. Munds, 20 Del.Ch. 142,  [***526]  172 A. 452, and was followed in Root v. York Corporation, 29 Del.Ch. 351, 50 A.2d 52, and In re General Realty & Utilities Corporation, 29 Del.Ch. 480, 52 A.2d 6. We think the basic doctrine of valuation applied in Chicago Corporation v. Munds, supra, was formulated in accordance with proper principles and the better reasoned authorities.

] The basic concept of value under the appraisal statute is that the stockholder is entitled to be paid for that which has been taken from him, viz., his proportionate interest in a going concern. By value of the stockholder's proportionate interest in the corporate enterprise is meant the true or intrinsic value of his stock which has been taken by the merger. ] In determining what figure represents this true or intrinsic value, the appraiser and the courts must take into consideration [**4]  all factors and elements which reasonably might enter into the fixing of value. Thus, market value, asset value, dividends, earning prospects, the nature of the enterprise and any other facts which were known or which could be ascertained as of the date of merger and which throw any light on future prospects of the merged corporation are not only pertinent to an inquiry as to the value of the dissenting stockholders' interest, but must be considered by the agency fixing the value.

The rule as stated requires that certain obvious conclusions be drawn. Thus, since intrinsic or true value is to be ascertained, the problem will not be settled by the acceptance as the sole measure of only one element entering into value without considering other elements. For example, as was specifically held in Chicago Corporation v. Munds, supra, ] market value may not be taken as the sole measure of the value of the stock. So, also, ] since value is to be fixed on a going-concern basis, the liquidating value of the stock may not be accepted as the sole measure of value.

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74 A.2d 71 *; 1950 Del. LEXIS 23 **; 31 Del. Ch. 523 ***

In the Matter of the Application of TRI-CONTINENTAL CORPORATION, Petitioner Below, Appellant, v. STANLEY BATTYE, CENTRAL STATES ELECTRIC CORPORATION IN REORGANIZATION, DREYFUS & CO., ILSE HIRSCHMANN, OTTO HIRSCHMANN, McDONNELL & CO., MERRILL LYNCH, PIERCE, FENNER & BEANE, and GRIFFITH MOORE, Respondents Below, Appellees, for a determination by an appraiser to be appointed by the Chancellor, of the value of the stock of General Shareholdings Corporation held by defendants

Prior History:  [**1]  Appeal from an order entered in the Court of Chancery, in and for New Castle County, in conformity with the opinion reported 31 Del. Ch. 101, 66 A. 2d 910.

General Shareholdings Corporation, a Delaware corporation (referred to hereinafter as General), was merged into its parent company, Tri-Continental Corporation, a Maryland corporation (referred to hereinafter as Tri-Continental), as of October 1, 1948. Pursuant to Section 61 of the Delaware General Corporation Law, Revised Code 1935, § 2093, certain common stockholders of General objected to the terms of the merger and complied with the statutory requirements to register their objection. Thereafter, the Vice Chancellor determined the common shareholders of General entitled to a valuation of and payment for their shares and appointed an appraiser to determine the value of the common shares of General as of October 1, 1948.

There were seven dissenting shareholders of General holding in the aggregate approximately 100,000 shares. The burden of the hearings before the appraiser was assumed by Central States Electric Corporation in Reorganization (referred to hereinafter as Central States), the holder of 97,523 shares.

The [**2]  appraiser fixed the value of General's common stock on October 1, 1948 at $ 4.08 per share. Central States excepted to the appraiser's report. The Vice Chancellor sustained the exceptions and fixed the value of General's common stock at $ 4.62 per share. From the order of the Vice Chancellor fixing the value of the common stock of General, Tri-Continental appealed.

CORE TERMS

common stock, net asset value, stock, market value, leverage, discount, stockholder, closed-end, asset value, investment company, merger, stock market, constructed, common shares, regulated, dividends, portfolio, arriving, proportionate interest, intrinsic value, tax situation, market price, per share, liquidating

Business & Corporate Law, Appraisal Actions & Dissent Rights, Right to Dissent, Mergers & Acquisitions, Mergers & Acquisitions Law, General Overview, Shareholder Actions, Procedural Matters, Mergers, Rights of Dissenting Shareholders, Tax Law, Federal Taxpayer Groups, S Corporations, Distributions by S Corporations, Securities Law, Investment Companies, Classification, Closely Held Corporations, Management Duties & Liabilities, Distributions, Redemptions & Repurchases, C Corporations, REITs, REMICs, RICs & FASITs, Valuation, Activities, Remedies, Civil Procedure, Costs & Attorney Fees, Costs