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P. Clarkson Collins Jr.

Corporate practitioners have been closely following developments in Delaware’s shareholder appraisal litigation. Much of the interest concerns the court’s “fair value” determination and the risk that an acquiring company will have to pay appraisal petitioners more than the merger deal price, even in an arms-length transaction resulting from a robust market search. In a much-anticipated decision, the Delaware Supreme Court reversed the trial court’s fair value determination in DFC Global v. Muirfield Value Partners, No. 518, 2016 (en banc Aug. 1). The court’s opinion provides valuable guidance about the relative importance of the deal price in the court’s adjudication of the “fair value” of a petitioner’s shares.

BACKGROUND

DFC Global was a payday loan company that was acquired and taken private in 2014 by Lone Star, a private equity firm. Formed in 1990 with operations solely in the United States, DFC grew rapidly through acquisitions to become a worldwide business operating in 10 countries with more than 1,500 locations. It also had an internet lending business. It became a public company in 2004, and in the next 10 years grew its revenue from $270 million to $1.12 billion. Its shares traded on the NASDAQ exchange, and it had a deep public float.

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