The Delaware Supreme Court has delivered the latest of a series of recent appraisal decisions concerning the determination of fair value under 8 Del. C. § 262(a): Brigade Leveraged Capital Structures Fund and Brigade Distressed Value Master Fund Ltd v Stillwater Mining Co.
Stillwater will be of interest to industry participants engaged in share appraisal litigation in the Cayman Islands, where regard can be paid to Delaware jurisprudential developments in this area notwithstanding the notable differences between the two respective appraisal regimes.
The decision underlines the pre-eminence of market-based factors (notably the unaffected market price and the negotiated deal price) in determining fair value in Delaware. In particular, provided it is shown to the satisfaction of the Court that there has been a robust (albeit not necessarily flawless) sales process, it is probable that the deal price will be held to be the most persuasive indicator of fair value.
In Delaware, as in the Cayman Islands, there is no statutory presumption that one particular valuation methodology will predominate in a given case. However, the Delaware Supreme Court has noted (in its decision in DFC and in subsequent decisions) that the refusal to craft such a presumption “does not in any way signal the Court’s ignorance to the economic reality that the sale value resulting from a robust market check will often be the most reliable evidence of fair value, and that second-guessing the value arrived upon by the collective views of many sophisticated parties with a real stake in the matter is hazardous.”
In this respect at least, the prominence of market-based indicia of value (in particular, deal price) in Delaware is arguably different to the position in the Cayman Islands, where non-market based valuation methodologies (most notably, the discounted cash flow method) undeniably can still feature as part of the appraisal landscape.