IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE: APPRAISAL OF 

JARDEN CORPORATION

:

:

:

:

 

 CONSOLIDATED

 C.A. No. 12456-VCS

ORDER

On this 16th day of September, 2019, upon consideration of Petitioners’ 

Motion for Reargument (the “Motion”) and the Respondent’s Opposition to 

Petitioner’s Motion for Reargument (the “Response”), it appears that:

1. On July 19, 2019, the Court issued its post-trial opinion in this appraisal 

action (the “Opinion”) in which the Court appraised the fair value of Jarden 

Corporation at the time of its merger with Newell Rubbermaid, Inc. at $48.31 per 

share. I based that appraisal on Jarden’s Unaffected Market Price (as defined in the 

Opinion).

1

 I also determined that this fair value determination was corroborated by:

(i) other market evidence, including a pre-merger Jarden stock offering at $49.00 

per share; (ii) my independent discounted cash flow (“DCF”) analysis, which 

yielded a value for Jarden of $48.13 per share; and (iii) to a lesser degree,

Respondent’s merger-price-less-synergies analysis, which yielded a value of $46.21 

per share. These valuation measures stood in contrast to Petitioner’s proffered fair 

 

1

In re Appraisal of Jarden Corp., Consol. C.A. No. 12456 (Del. Ch. July 19, 2019) (“Op.”). 
2

value of $71.35 per share based on a comparable companies analysis, which I 

rejected as incredible for reasons stated in the Opinion. 

2. In the Motion, Petitioner’s argue that my DCF analysis does not 

corroborate my fair value determination because the DCF results were the product 

of certain structural and mathematical flaws. Specifically, Petitioners argue 

I miscalculated Jarden’s unlevered free cash flows, miscalculated the weighted 

average cost of capital (“WACC”), miscalculated the terminal value and failed to 

make proper adjustments for certain tax shields and unfunded 

pension/postretirement liabilities. According to Petitioners, correcting for these 

errors results in a DCF value for Jarden of between $61.59 and $64.01 per share. 

And because this valuation is not corroborative of the Court’s appraisal based on 

Jarden’s Unaffected Market Price, Petitioners maintain that the Court must adjust 

its appraisal to reflect at least the range indicated by the corrected DCF analysis.

3. “A motion for reargument under Court of Chancery Rule 59(f) will be 

denied unless the court has overlooked a controlling decision or principle of law 

that would have controlling effect, or the court has misapprehended the law or the 

facts so that the outcome of the decision would be different.”2 In the appraisal 

context, this court has granted reargument in instances where the court has made 

 

2 Those Certain Underwriters at Lloyd’s, London v. Nat’l Installment Ins. Servs., 2008 

WL 2133417, at *1 (Del. Ch. May 21, 2008).
3

structural or mathematical errors in the course of performing its own DCF analysis.3

For reasons explained below, I agree with Petitioners that my DCF analysis must 

be corrected as the result of errors made in structuring the DCF model and 

calculating the value.

4

 I disagree, however, that the corrected DCF yields a fair 

value in the range of $61.59 and $64.01 per share.

4. Unlevered Free Cash Flows - The calculation of free cash flows in the 

Opinion’s DCF model does not add back depreciation or deduct Jarden’s year-overyear increase in net working capital. Petitioner corrects this error by adding 

 

3

See, e.g., Doft & Co. v. Travelocity.com Inc., 2004 WL 1366994 (Del. Ch. June 10, 2004); 

Henke v. Trilithic Inc., 2005 WL 3578094 (Del. Ch. Dec. 20, 2005); DFC Global Corp. v. 

Muirfield Value P’rs, L.P., 172 A.3d 346 (Del. 2017).

4

Ironically, in the Opinion, I cautioned that our courts should not wade “deep into the 

weeds of economics and corporate finance” without “the guidance of experts trained in 

these disciplines.” Op. at 2. Yet that is precisely what I did when I endeavored to conduct 

my own DCF analysis upon concluding that the credible evidence did not support certain 

aspects of both of the competing experts’ DCF valuations. While I stand by that factual 

determination, I did not adequately account for the fact that making adjustments to the 

experts’ DCF models might require that other adjustments be made in order to stay true to 

the DCF methodology. I made other unforced errors as well. With the assistance of the 

parties, and their experts’ supplemental affidavits, I have attempted to correct those errors 

here as best I can acknowledging fully that there must be a “better way to run a railroad.” 

In view of the fact that the parties’ experts could not agree on any of the significant inputs 

for the DCF analysis, I am more convinced than ever that the experts’ inability to agree on 

inputs is evidence that DCF is not reliable here, particularly given the presence of a reliable 

“market-based metric.” In re Stillwater Mining Co., 2019 WL 3943851, at *61 (Del. Ch. 

Aug. 21, 2019). The better approach, therefore, would have been to leave it at that rather 

than “parse through the inputs and hazard semi-informed guesses about which expert’s 

view was closer to the truth.” Id. Having endeavored, instead, to work through the DCF 

on my own, I will see that process through to the bitter end by engaging in the revised DCF 

presented here.
4

depreciation and subtracting the increase in net working capital. I agree that this 

adjustment is proper, and reflect the adjustment below:

5. Weighted Average Cost of Capital - The Opinion’s calculation of 

WACC incorrectly adjusted for tax twice, by making tax adjustments to the aftertax cost of debt. Petitioner corrects for this error by omitting this second tax 

adjustment from the after-tax cost of debt. I agree that this adjustment is appropriate, 

and reflect the adjustment below:
5

I calculate the cost of equity, as I did in the Opinion, by using the capital asset 

pricing model (CAPM), which defines the cost of equity as follows:

re = rf + β × (rm − rf) + Size Premium

Where:

rf = Risk-free rate (represented by 10-yr U.S. Treasury bond rate)

β = Predicted equity beta (levered)

(rm − rf)= Equity risk premium

I calculate the after-tax cost of debt by multiplying the pre-tax cost of debt 

(4.31%) by (1 - tax rate). To arrive at WACC, I multiply the cost of equity by the 

equity to total capitalization, multiply the after-tax cost of debt by the debt to total 

capitalization and add these two numbers together.

6. Terminal Value - The terminal value equation cited in the Opinion 

conceptually intends to calculate the terminal value in perpetuity based on the year 

T+1 unlevered free cash flows, growing at the terminal growth rate and discounting

WACC. Petitioner points out that the Opinion’s DCF Model does not use Terminal 

FY21 NOPAT of $1,273 million in its formula to calculate the terminal value. 
6

Instead, the Opinion’s DCF Model uses Terminal FY21 unlevered free cash flows

of $939 million.5 Petitioner corrects for this error as follows:

 

5 Op. at 141 (the Opinion’s DCF Exhibit used FY20 NOPAT of $1,235 million × 

(1 + Terminal Growth Rate of 3.1%).

[A] FY20 NOPAT x 3.1% TGR; Opinion, pp. 110, 141; Exhibit 1

[B] Panel A: Opinion, p. 141; Exhibit 1, Panel B: n/a

[C] Panel A: Opinion, p. 141; Exhibit 1, Panel B: n/a

[D] Panel A: FY21 Revenue x (average (Capital Expenditures / Revenue) for FY 16–FY20); 

Opinion, pp. 136, 141; Exhibit 1; Panel B: n/a

[E] Panel A: [A] + [B] - [C] - [D]; Opinion, p. 141; Exhibit 1; Panel B: n/a

[F] Panel A: [E] x (1 - 27.75% Terminal Investment Rate); Opinion, p. 141; Panel B: [A] x 

(1 - 27.75% Terminal Investment Rate) (see Opinion, pp. 115, 135–136, citing JX 1816 at 

¶ 95; JX 2515, Damodaran, Investment Valuation at 313)

[G] WACC - TGR = 6.94% - 3.10% if using the Court’s WACC and 7.29% - 3.10% if using the 

corrected WACC (see Opinion, pp. 110, 135; Exhibit 3)

[H] [F] / [G]

[I] Row [A]

[J] Row [F]

[K] [I] - [J]
7

Petitioner then uses the Opinion’s 27.75% Terminal Investment Rate (TIR), 

Terminal FY21 NOPAT and the capitalization factor to arrive at the final Terminal 

Value. The Opinion derived the 27.75% TIR by averaging Dr. Hubbard’s 33.9% 

terminal investment rate (from the McKinsey formula for TIR6) and Jarden’s 21.6% 

historical five-year average.7 As explained in the Opinion, I took the average of 

Dr. Hubbard’s investment rate and Jarden’s historical five-year average because 

I found that Dr. Hubbard had inexplicably included six years in his TIR, while the 

terminal growth rate included only five.8“By including the sixth year [the 2010 

investment rate of 64.3%] in his calculation, Dr. Hubbard was able to reach a 

significantly higher number for Jarden’s historical average growth.”

9

 

I agree with Respondent that maintaining 27.75% as the TIR in this revised 

DCF valuation does not make sense for two reasons. First, as the Opinion notes and 

endorses, “the return on new invested capital should equal the company’s WACC”

10

and, as explained above, WACC (as amended here) is 7.29%. The Opinion’s TIR 

improperly departs from this principle. Second, I no longer see a basis to account or 

 

6 TIR = g/RONIC.

7 Op. at 110–12.

8 Op. at 114.

9 Op. at 114.

10 Op. at 113 (citing Trial Tr. 1046:11–1049:23 (Hubbard); JX 2516; JX 2515). 
8

adjust for the unjustified sixth year of comparable growth as proffered by 

Dr. Hubbard.

11 This allows a straightforward application of the McKinsey formula, 

as endorsed in the Opinion, to arrive at TIR given the corrected WACC and the 

terminal growth rate.12

Respondent has presented in the Response the following calculation for 

determining the terminal value, adjusted for revised RONIC:

While I agree with the methodology employed in this calculation, I note that my 

math yields $17,462, not $17,464. In any event, I rely on the terminal value 

($17,465) calculated in the revised DCF (below) since it is the product of the 

unrounded numbers with which the parties now otherwise agree, except for the TIR. 

To be clear, I adjust the terminal value calculation in order for RONIC to equal 

WACC under the McKinsey formula, by multiplying one minus the revised terminal 

investment rate (3.1%/7.3%) by the FY21 net operating profits after tax (or NOPAT)

 

11 In this regard, Respondent makes a valid point that the Court did not cite to finance 

literature or the record in reaching its “blended TIR.” Response at 11. 

12 See Trial Tr. 1064:24–1065:6 (Hubbard); JX 2516 at 249–50; JX 2515 at 291; JX 1816 

¶ 94; Aff. Prof. Hubbard ¶ 7 (Aug. 2, 2019). 
9

(a value of $1,273.3). I then divide the resulting product ($731.8—the FY21 

unlevered FCF) by the capitalization factor (7.29% - 3.1% = 4.19%) to reach the 

terminal value of $17,465. 

7. Enterprise Value - The Opinion’s DCF model treated FY16 as a full 

year, and thus includes all of the FY16 unlevered free cash flows in its calculation. 

The problem, as Petitioner correctly notes, is that the merger closed in the first 

quarter of FY16 so the calculation of FY16 free cash flows should be adjusted to 

reflect the partial year.

Dr. Zmijewski adjusted for the partial FY16 by multiplying the full year FY16 

forecasted unlevered free cash flows by the portion of the year that remained after 

the merger.

13

 Dr. Hubbard adjusted for the partial FY16 by calculating partial year 

FY16 unlevered free cash flows as equal to the full year FY16 forecasted unlevered 

free cash flows minus the actual first quarter FY16 reported unlevered free cash 

flows.14 I adopt Dr. Zmijewski’s approach for the FY16 partial year adjustment

because, in my view, it more accurately accounts for the fact that the merger date 

(April 15, 2016) was in the first few days of the second quarter of FY16. 

 

13 JX 1818, Ex. VI-7A. 

14 JX 1816, Ex. 16.
10

8. Convertible Debt - The Opinion’s DCF model mistakenly adopted 

Dr. Hubbard’s adjustment of $1.71 billion for convertible debt. Convertible debt is 

dependent on pre-tax cost of debt and the value of equity. Because the Opinion

changed Dr. Hubbard’s pre-tax cost of debt and made other changes that affect 

equity value, the value of convertible debt must also change. Dr. Hubbard updated 

the convertible debt valuation from my DCF model to reflect the revised cost of debt 

(4.31% pre-tax) and the revised enterprise value that follows from the other 

corrections. Convertible debt, as the parties acknowledge, is derived from valuing 

both the debt component and the warrant component of the convertible notes. 

Dr. Hubbard employs an option-pricing model to arrive at the value of both 

components. In doing so, it appears Dr. Hubbard used the share price he derived by 

using the rounded terminal value that, as explained above, is not consistent with my 

understanding of the proper application of the relevant formula. Nevertheless, I will 

not disturb Dr. Hubbard’s calculated value for convertible debt. Not only do 

Petitioners use Dr. Hubbard’s method of valuing convertible debt in in their revised 

DCF, Dr. Hubbard has represented that he made the appropriate adjustments based 

on the revised enterprise value and cost of debt and I have no basis to question that 

representation. 

9. Amortization - The Opinion’s DCF Model does not include any value 

from tax savings that Jarden expected to receive from the amortization of intangible 
11

assets. Both experts included in their DCF models the value of tax shields that 

Jarden expected to receive from the amortization of intangible assets. And both 

experts valued these amortization tax shields using a discounted cash flow model.15

I adopt Dr. Hubbard’s amortization tax shield since he uses the amortization 

values found in the Proxy, but I apply the corrected 7.29% WACC and 35% tax rate, 

which yields a value of $110.2 million.

10. Pension and Post-Retirement Liabilities - The Opinion’s DCF model 

does not include any subtraction for pension and post-retirement liabilities in the 

calculation of the value of equity. Both experts included a deduction of $159 million 

in their calculations of the value of equity. I agree that this adjustment is appropriate. 

11. The Corrected DCF Valuation - Correcting for the errors noted 

above, the corrected DCF valuation is as follows:

 

15 JX 1816 ¶¶ 134, 138; JX 1818 ¶ 69.
12

12. The revised DCF, correcting for the errors properly identified by 

Petitioners and the revised TIR required by a proper application of the McKinsey 

formula yields a fair value for Jarden of $48.23 per share. “Hazardous” as it may be 

to rely upon the results of this valuation methodology in this context, particularly 

when credible market evidence of value is available,16 I am satisfied that the revised 

 

16 See Dell, Inc. v. Magnetar Global Event Driven Master Fund Ltd., 177 A.3d 1, 35–37

(Del. 2017) (observing that “[a]lthough widely considered the best tool for valuing 

companies when there is no credible market information and no market check, DCF 

valuations involve many inputs – all subject to disagreement by well-compensated and 

Discounted Cash Flow Analysis

($ in Millions) FY16 FY17 FY18 FY19 FY20

Termin

al

FY21

 

Revenue $10,147 $10,640 $11,172 $11,731 $12,317 $12,928

 Growth Rate -- 4.9% 5.0% 5.0% 5.0% 5.0%

Unlevered Cash Flow $751 $884 $970 $1,044 $1,122 $731.8

- Cash Flow for Portion of Year Already Elapsed 210 0 0 0 0 -

 

Unlevered Free Cash Flow Adjusted for Portion 

of Year Already Elapsed $541 $884 $970 $1,044 $1,122 $731.8

Capitalization Factor (WACC – TGR) 4.2%

Terminal Value $17,465

Time Period 0.36 1.21 2.22 3.22 4.22 4.22

Discounted Cash Flows 527 811 830 832 834 12,978

Enterprise Value $16,813

Non-Convertible Debt (5,043)

Value of Convertible Debt (1,865)

Pension and Postretirement Liability (159)

Cash 749

Amortization Tax Shield 110

Equity Value $10,605

Shares 219.9

Share Price $48.23

 Assumptions 

WACC: 7.29%

Terminal Growth: 3.1%

ROIC: 7.29%

FY21 Rev Growth: 5.0%

FD Share Count 219.9
13

DCF valuation corroborates the Court’s appraisal based on the Unaffected Market 

Price of $48.31 per share. 

Based on the foregoing, the Motion for Reargument is GRANTED in part as 

it relates to the Court’s DCF valuation, and DENIED in part as it relates to the 

Court’s final fair value determination.

IT IS SO ORDERED. 

 /s/ Joseph R. Slights III 

 Vice Chancellor

 

highly credentialed experts – and even slight differences in these inputs can produce large 

valuation gaps[,]” and then warning, “the Court of Chancery should be chary about 

imposing the hazards that always come when a law-trained judge is forced to make a point 

estimate of fair value based on widely divergent partisan expert testimony.”).