On March 27, Mike Kelly argued probably the most important corporate case before Delaware Supreme Court this year, Verition vs. Aruba, a highly-anticipated case that could alter the appraisal valuation practices of Delaware-based companies in M&A transactions. Aruba was the first case in over 60 years where the trial court found market price to be the “fair value” of shares in an appraisal action. Mike emphasized the uniqueness of the case in that the synergies between the acquiring company, Hewlett Packard, and the acquired company, Aruba, were massive and almost impossible to calculate. Mike argued that market price, especially in light of the recent DFC and Dell Delaware Supreme Court decisions was the most accurate indicator of fair value in this case. He also praised the trial court for its scholarly and exceptionally thorough opinion, and stated that the court “bent over backwards” to give the parties the opportunity to offer additional evidence after the DFC and Dell decisions were decided-both cases were handed down after the Aruba trial had concluded.
In the original Aruba case, the trial court ruled in HP’s favor basing the appraisal valuation of Aruba Networks, on its previous 30-day stock market price, prior to the deal’s announcement. This was almost half the price of what Verition was seeking. Verition appealed citing two previous cases, Dell and DFC. In these cases, the Delaware Supreme Court reversed the Delaware Chancery Court decisions, where the deal price was lower than the appraisal value. Instead, the Supreme Court relied on using efficient market principles, while also noting the obligation of the court conducting an appraisal valuation to consider “all relevant factors.” Mike revisited that theme in his appeal, stating that Vice Chancellor J. Travis Laster went to “great pains” to reconcile his ruling with the Supreme Court’s earlier decisions in Dell and DFC. The decision is expected by early summer.
Additional News Coverage:
Del. Supreme Court Urged to Look Past Deal Price in Hewlett-Packard's Acquisition of Wireless Network - Law.com (Subscription required)
Aruba Appraisal Cannot Stand, Investors Tell Del. Justices - Law360 (Subscription required)
Strine Mum in Aruba Appellate Argument - The Deal
Del. Supreme Court Urged to Look Past Deal Price in Hewlett-Packard’s Acquisition of Wireless Network - Delaware Business Court Insider