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Law School Case Brief

DFC Glob. Corp. v. Muirfield Value Partners, L.P. - 172 A.3d 346 (Del. 2017)

Rule:

The merger price in an arm's-length transaction that was subjected to a robust market check is a strong indication of fair value in an appraisal proceeding as a general matter. 

Facts:

In this appraisal proceeding involving a publicly traded payday lending firm purchased by a private equity firm, the respondent argued that the court should establish, by judicial gloss, a presumption that in certain cases involving arm's-length mergers, the price of the transaction giving rise to appraisal rights is the best estimate of fair value. 

Issue:

Should the court establish a presumption that in certain cases involving arm's-length mergers, the price of the transaction giving rise to appraisal rights is the best estimate of fair value?

Answer:

No

Conclusion:

The Court held that in an appraisal proceeding involving a publicly traded payday lending firm purchased by a private equity firm, under the conditions found by the Court of Chancery, economic principles suggested that the best evidence of fair value was the deal price, as it resulted from an open process, informed by robust public information, and easy access to deeper, non-public information, in which many parties with an incentive to make a profit had a chance to bid. The record did not sustain the Court of Chancery's decision to substantially increase the company's perpetuity growth rate in its discounted cash flow model after reargument. The Court of Chancery did not abuse its discretion by giving weight to its comparable companies analysis, as the analysis was supported by the record; it was a rare instance where both experts agreed on the comparable companies used.

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