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Verition Partners Master Fund Ltd. v. Aruba Networks, Inc.

Court of Chancery of Delaware

January 26, 2018, Submitted; February 15, 2018, Decided

C.A. No. 11448-VCL

Opinion

MEMORANDUM OPINION

LASTER, V.C.

In May 2015, Hewlett-Packard Company ("HP") acquired Aruba Networks, Inc. ("Aruba" or the "Company"). The transaction was governed by an Agreement and Plan of Merger by and among Aruba, HP, and Aspen Acquisition Sub., Inc., a wholly owned subsidiary of HP. Under the merger agreement, each share of Aruba common stock was converted into the right to receive consideration of $24.67 per share, subject to the holder's statutory right to eschew the merger consideration and seek appraisal.1 The petitioners perfected their appraisal rights and litigated this statutory appraisal proceeding. This is the court's post-trial decision on the issue of fair value.

The Delaware Supreme Court's decisions in Dell2 and DFC3 endorse using the market price of a widely [*2]  traded firm as evidence of fair value.4 As in Dell and DFC, the market for Aruba's shares exhibited attributes associated with the premises underlying the efficient capital markets hypothesis. Under Dell and DFC, these attributes provide sufficient evidence of market efficiency to make Aruba's stock price "a possible proxy for fair value."5 Aruba's thirty-day average unaffected market price was $17.13 per share.

The Delaware Supreme Court's decisions in Dell and DFC endorse using the deal price in a third-party, arm's-length transaction as evidence of fair value.6 ] When evaluating the reliability of the deal price, a trial judge must remember that

the purpose of an appraisal is not to make sure that the petitioners get the highest conceivable value that might have been procured had every domino fallen out of the company's way; rather, it is to make sure that they receive fair compensation for their shares in the sense that it reflects what they deserve to receive based on what would fairly be given to them in an arm'slength transaction.7

Put differently, "[t]he issue in an appraisal is not whether a negotiator has extracted the highest possible bid. Rather, the key inquiry is [*3]  whether the dissenters got fair value and were not exploited."8

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2018 Del. Ch. LEXIS 52 *; 2018 WL 922139

VERITION PARTNERS MASTER FUND LTD. and VERITION MULTI-STRATEGY MASTER FUND LTD., Petitioners, v. ARUBA NETWORKS, INC., Respondent.

Notice: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.

Subsequent History: Rehearing denied by Verition Partners Master Fund Ltd. v. Aruba Networks, Inc., 2018 Del. Ch. LEXIS 160 (Del. Ch., May 21, 2018)

Reversed by, Remanded by, Judgment entered by Verition Partners Master Fund, Ltd. v. Aruba Networks, Inc., 2019 Del. LEXIS 197 (Del., Apr. 16, 2019)

CORE TERMS

synergies, fair value, email, valuation, merger, per share, market price, appraisal, cash flow, projections, analyst, discounted, announced, shares, estimate, negotiations, stock price, trading, stock, banker, premium, team, buyer, growth rate, Proxy, stockholders, capital market, unaffected, Opening, earnings

Business & Corporate Law, Shareholder Actions, Appraisal Actions & Dissent Rights, Fair Market Value, Meetings & Voting, Special Meetings, Fundamental Changes, Mergers & Acquisitions Law, Mergers, Duties & Liabilities of Shareholders, Remedies, Corporations, Appraisal Actions & Dissent Rights, Directors & Officers, Management Duties & Liabilities, Fiduciary Duties, Causes of Action, Fraud & Misrepresentation, Sales of Assets, Evidence, Procedural Matters, Preliminary Questions, Admissibility of Evidence, Statements as Evidence, Hearsay, Rule Components, Exceptions, Business Records, Normal Course of Business