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The Delaware courts have adopted a general approach to the appraisal of stock which a Massachusetts judge might appropriately follow. The Delaware procedure, known as the "Delaware block approach," calls for a determination of the market value, the earnings value, and the net asset value of the stock, followed by the assignment of a percentage weight to each of the elements of value.
The plaintiffs were stockholders in Boston Garden Arena Corporation (Garden Arena), a Massachusetts corporation whose stockholders voted on July 19, 1973, to merge with the defendant corporation in circumstances which entitled each plaintiff to "demand payment for his stock from the resulting or surviving corporation and an appraisal in accordance with the provisions of [G. L. c. 156B, §§ 86-98]." G. L. c. 156B, § 85, as amended by St. 1969, c. 392, § 22. The plaintiffs commenced this action under G. L. c. 156B, § 90, seeking a judicial determination of the "fair value" of their shares "as of the day preceding the date of the vote approving the proposed corporate action." G. L. c. 156B, § 92, inserted by St. 1964, c. 723, § 1. Each party has appealed from a judgment determining the fair value of the plaintiffs' stock. We granted the defendant's application for direct appellate review. On July 18, 1973, Garden Arena owned all the stock in a subsidiary corporation that owned both a franchise in the National Hockey League (NHL), known as the Boston Bruins, and a corporation that held a franchise in the American Hockey League (AHL), known as the Boston Braves. Garden Arena also owned and operated Boston Garden Sports Arena (Boston Garden), an indoor auditorium with facilities for the exhibition of sporting and other entertainment events, and a corporation that operated the food and beverage concession at the Boston Garden. A considerable volume of documentary material was introduced in evidence concerning the value of the stock of Garden Arena on July 18, 1973, the day before Garden Arena's stockholders approved the merger. Each side presented expert testimony. The judge gave consideration to the market value of the Garden Arena stock, to the value of its stock based on its earnings, and to the net asset value of Garden Arena's assets. Weighting these factors, the judge arrived at a total, per share value of $75.27.
Did the trial judge err in the process of valuing the Garden Arena stock?
The court concluded that the trial judge followed acceptable procedures in valuing the Garden Arena stock; that his determinations were generally within the range of discretion accorded a fact finder; but that the judge's treatment of the evidence was, or may have been, in error on three points: his valuation of the Boston Garden, the Bruins franchise, and the concession operation.