IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

MERION CAPITAL LP and MERION CAPITAL II LP, Petitioners, ) ) ) )

v. ) ) ) C.A. No. 8900-VCG BMC SOFTWARE, INC.,

Respondent. )

) )

MEMORANDUM OPINION Date Submitted: October 7, 2014 Date Decided: January 5, 2015 Steven T. Margolin, Marie M. Degnan, and Phillip R. Sumpter, of ASHBY & GEDDES, Wilmington, Delaware, Attorneys for Petitio ners. Collins J. Seitz, Jr., David E. Ross, and S. Michae l Sirkin, of SEITZ ROSS ARONSTAM & MORITZ LLP, Wilmington, Delaware; OF CO UNSEL: Yosef J. Reimer, P.C., Devora W. Allon, and Ryan D. McEnroe, of KIRKLAND & ELLIS LLP, New York, New York, Attorneys for Respondent.

GLASSCOCK, Vice Chancellor1

This action, and a similar case in which I am simu ltaneously issuing a memorandum opinion, 1 concern an interpretation of the standing requirem ents under the appraisal statute, 8 Del. C. § 262, as amended in 2007. The respondent company alleges that the amendment altered those st anding requirements, which precludes the petitioning stockholders’ standing he re. Accordingly, the respondent company seeks summary judgment.

I. BACKGROUND FACTS A. The Merger This appraisal action stems from a take-private mer ger between Respondent BMC Software, Inc. (“BMC”) and two Delaware corpora tions formed by a consortium of private equity buyers solely for the purpose of taking BMC private—Boxer Parent Company Inc. and its wholly ow ned subsidiary Boxer Merger Sub Inc. (collectively, “Boxer”). 2 BMC, also a Delaware corporation, is “one of the world’s largest software companies,” pr oviding “IT management solutions for large, mid-sized, and small enterpris es and public sector organizations

around the world.” 3 On May 6, 2013, BMC and Boxer entered into an Agr eement

1 In re Appraisal of Ancestry.com, Inc. , C.A. No. 8173-VCG (Del. Ch. Jan. 5, 2015). 2 Sirkin Aff. Ex. 2, at 19. The buyer group consist s of Bain Capital, LLC, Golden Gate Private Equity, Inc., Insight Venture Management, LLC, and Westhorpe Investment Pte Ltd. Id. 3 Id

.2

and Plan of Merger (the “Merger Agreement”) whereby Boxer was to acquire BMC for $46.25 per share of common stock. 4 Petitioners Merion Capital LP and Merion Capital II LP (collectively, “Merion”) are self-described “event-driven investme nt” funds, 5 or, in the words of the Respondent, “hedge fund[s] that specialize[] in appraisal arbitrage.” 6 “Appraisal arbitrage” is a phrase commonly used to denote an investment strategy whereby an investor acquires an equity position in a cash-out merger target with the specific intention of exercising the statutory stockholder appraisal right found

in 8 Del. C . § 262; in the subsequent appraisal action the cou rt awards the appraisal petitioners what the court determines to be the fai r value of the target, which, if the target was undervalued in the transaction, represen ts a positive return on the arbitrage investor’s initial investment. Pursuant to this investment strategy,

Merion determined that the “consideration offered i n the [BMC/Boxer] merger . . . [was] considerably below the value of BMC” and bega n purchasing shares of

4 Sirkin Aff. Ex. 4, at 2. In the months following the execution of the Merger Agreement, BMC and Boxer further negotiated an equity roll-over fo r a BMC stockholder and a $0.05 increase in merger consideration. Id. The parties eventually agreed to the roll-over but not the price increase, and executed that change in Amendment No. 1 to the Merger Agreement. Id. 5 Pet’rs’ Answering Br. in Opp’n to Resp’t’s Mot. fo r Summ. J. at 6; see also Sirkin Aff. Ex. 8, at 15:23–16:8 (“Q. What did [Merion founder] Mr. B arroway tell you about what he envisioned the business of Merion to be? A. He said that . . . they’re looking to start an event—he’s a former lawyer, and looking to start an event-driven fund and needed someone with analytical capability, merger experience, and that one of thos e strategies of the fund would be pursuing appraisal rights.”). 6 Opening Br. in Supp. of Resp’t’s Mot. for Summ. J. at 7.3

BMC stock on the public market, through a series of brokers, in July 2013. 7 By July 17, 2013, Merion had acquired 7,629,100 shares of BMC common stock and, as the beneficial owner of those shares, moved to p erfect its right under the appraisal statute. 8 Because only the record holder of shares can make t he statutorily required demand for appraisal on the corporation under Secti on 262, 9 a beneficial owner seeking appraisal must direct the record holder of its shares to make a demand for appraisal on the beneficial owner’s behalf. 10 Typically, according to Merion, a beneficial owner would accomplish this by directing an intermediary broker to direct the record holder to issue the demand; in th is instance, however, when Merion attempted to direct its broker to pass along its demand request to the record owner of its BMC shares, Cede & Co. (“Cede”), the n ominee of the Depository Trust Company (“DTC”), the broker refused, citing a policy change within the

7 Sirkin Aff. Ex. 8, at 23:16–20, 212:20–219:12. 8 Id. at 248:13–252:17. 9 See 8 Del. C. § 262(a) (“Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuan t to subsection (d) of this section with respect to such shares, . . . who has otherwise com plied with subsection (d) of this section . . . shall be entitled to an appraisal by the Court of C hancery of the fair value of the stockholder’s shares of stock . . . . As used in this section, t he word ‘stockholder’ means a holder of record of stock in a corporation . . . .”); id. § 262(d) (“Each stockholder electing to demand the appraisal of stockholder’s shares shall deliver to the corporati on, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder’s shares.”). 10 The operation of modern securities practice, inclu ding the delineation between beneficial owners and record holders of stock and the ubiquity of central securities depositories like the Depository Trust Company, has been previously chron icled by this Court, and I do not find it necessary to replicate that information here. The r eader is referred to former Chancellor Chandler’s opinion in In re Appraisal of Transkaryotic Therapies, Inc. , 2007 WL 1378345, at *2 (Del. Ch. May 2, 2007), for a thorough discussion o f the topic.4

broker company. 11 Merion claims that, as a result, the “unexpected news left [it] with only one path for ensuring that its appraisal demand would be timely

submitted— i.e. , take the steps necessary to have its holdings in BMC stock withdrawn from the fungible mass at DTC/Cede and re gistered directly with BMC’s transfer agent, Computershare.” 12 In other words, Merion sought to become not only the beneficial owner of its shares but also the record holder, so that Merion itself could make the statutorily requi red appraisal demand on BMC. 13 Over the next few days Merion carried out that task , and on July 19, 2013, Computershare confirmed that it had transferred 7,6 29,100 shares of BMC common stock from the fungible bulk at DTC/Cede to Merion, which now held the

shares in record name on its books. 14 On July 22, 2013, Merion delivered its formal demand for appraisal of those shares to BMC. 15 On the heels of Merion’s appraisal demand, on July 24, 2013, BMC held a special meeting of stockholders to vote on the prop osed merger of BMC with and

11 Sirkin Aff. Ex. 8, at 277:4–20. 12 Pet’rs’ Answering Br. in Opp’n to Resp’t’s Mot. fo r Summ. J. at 12. Merion’s portfolio manager, Samuel Johnson, explained that Merion itse lf could not petition DTC/Cede to make the appraisal demand because Merion was not a participa nt in DTC/Cede, which is why it was required to rely on a broker to communicate with DT C/Cede. See Sirkin Aff. Ex. 8, at 278:2–7 (“[A]s a street name beneficial holder of stock, wh ich is what we were at the time, we cannot go directly to Cede & Co. and ask them to sign this [d emand] letter. Only participants in DTC are allowed to interact with DTC or Cede.”). 13 Sirkin Aff. Ex. 8, at 278:11–279:4. 14 See Sirkin Aff. Ex. 10, at 1–2 (stock transfer confirma tion). 15 See Sirkin Aff. Ex. 15 (demands for appraisal).5

into Boxer. 16 Holders of BMC common stock as of the June 24, 20 13 record date, representing 141,454,283 shares, approved the merge r by over a two-thirds vote: 95,033,127 shares were voted for adopting the Merge r Agreement while 46,421,156 shares were not voted for adopting the M erger Agreement. 17 Subsequently, the take-private merger between Boxer and BMC closed on September 10, 2013 with each share of BMC being con verted into a right to receive $46.25 in cash. 18 B. Procedural History On September 13, 2013, Merion commenced this action by filing its Verified Petition for Appraisal of Stock. In that Petition, Merion represented that it “did not vote [its 7,629,100 shares of BMC] in favor of the Merger, [has] not sought to exchange [those shares] for payment from BMC Softwa re in connection with the Merger, and [has] not withdrawn [its] demand for ap praisal of [those shares].” 19 Following stipulated discovery between the parties, BMC filed its Motion for Summary Judgment on July 28, 2014. I heard oral ar gument on this Motion in court on October 7, 2014.

16 Sirkin Aff. Ex. 2, at 21. 17 Sirkin Aff. Ex. 4, at 4. A majority vote was requ ired for BMC to adopt the Merger Agreement. Sirkin Aff. Ex. 2, at 22. 18 Sirkin Aff. Ex. 5, at 2. 19 Pet. for Appraisal ¶ 5.6

C. The Parties’ Contentions The narrow legal issue before this Court arises out of the specific factual circumstances surrounding Merion’s appraisal demand . Under the statute, had Merion simply been successful in getting its origin al record holder Cede to make the appraisal demand, Merion would have proper stan ding to file its appraisal

action. 20 However, because Merion withdrew its BMC shares f rom DTC/Cede and itself became the record holder demanding appraisal , BMC claims Merion can no longer satisfy the statute’s standing requirements. In support of that contention, BMC argues that Section 262 only permits the apprai sal of shares not voted in favor of the merger and that, consequently, Merion, as the record holder, bears the burden of proving that each share it seeks to have appraised was not voted by any previous owner in favor of the merger—a burden, if it exists, that Merion concededly has not met. 21 Conversely, Merion argues that no such burden exi sts in Section 262 and, in fact, has been previously rejec ted by this Court. Rather,

20 See 8 Del. C. § 262(a); infra note 49; In re Appraisal of Ancestry.com, Inc. , C.A. No. 8173- VCG, at 12–14 (Del. Ch. Jan. 5, 2015) (finding that Transkaryotic remains in force to permit a record holder to perfect appraisal rights for benef icial owners as long as the record holder holds sufficient shares in fungible bulk not voted in fav or of the merger to cover the number of shares for which the beneficial owner seeks to have apprai sed). 21 Johnson explained in his deposition that, because Merion purchased its shares on the open market, it cannot identify the entities from which it purchased its shares. Sirkin Aff. Ex. 8, at 216:11–14. In addition, because Merion’s shares we re transferred from the “fungible mass at DTC/Cede,” Merion is not able to say how the specif ic shares it came to hold on record were voted in the transaction; nor did Merion take any a dditional steps to ensure that those shares were not voted in favor of the merger, such as acquiring proxies from the prior owners of the shares. Id. at 217:15–219:12.7

Merion argues that, under the appraisal statute, it is only required to show that it has not voted the shares for which it seeks apprais al in favor of the merger—a standard that Merion concededly has met. 1. The Appraisal Statute In Section 262 of the Delaware General Corporation Law, the Delaware General Assembly has granted stockholders appraisal rights in certain transactions—including, relevantly here, cash-out m ergers—so long as the standing requirements of the statute are met. Thos e requirements are set forth in Section 262(a), which provides that: Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuan t to subsection (d) of this section with respect to such shares, wh o continuously holds such shares through the effective date of the merge r or consolidation, who has otherwise complied with subsection (d) of t his section and who has neither voted in favor of the merger or con solidation nor consented thereto in writing pursuant to § 228 of t his title shall be entitled to an appraisal by the Court of Chancery o f the fair value of the stockholder’s shares of stock under the circums tances described in subsection (b) and (c) of this section. As used in this section, the word “stockholder” means a holder of record of stoc k in a corporation . . . . 22 Thus, in order for a petitioner to perfect the appr aisal remedy according to the plain language of Section 262(a), the petitioner need onl y show that the record holder of the stock for which appraisal is sought: (1) held t hose shares on the date it made a statutorily compliant demand for appraisal on the c orporation; (2) continuously

22 8 Del C. § 262(a).8

held those shares through the effective date of the merger; (3) has otherwise complied with subsection (d) of the statute, concer ning the form and timeliness of the appraisal demand; and (4) has not voted in favo r of or consented to the merger with regard to those shares. 23 Noticeably absent from this language, or any langua ge in the statute, is an explicit requirement that the stockholder seeking a ppraisal prove that the specific

shares it seeks to have appraised were not voted in favor of the merger. Regardless, BMC argues that this Court should find such a share-tracing requirement 24 implicit in the statute’s requirements, considerin g the overall purpose of Section 262, references in other subsect ions of the statute to how specific shares were voted, and the policy concern that, without a share-tracing requirement, stockholders could have purchased shar es voted by their predecessors in favor of the merger, resulting in a theoretical possibility that appraisal could be sought for more shares than actually dissented in t he merger vote.

23 BMC conceded at oral argument that where Section 2 62(a) refers to a stockholder “who has neither voted in favor of the merger or consolidati on nor consented thereto in writing,” the statute means the stockholder has not voted in favo r of the merger or consented to it with respect to the shares it seeks to have appraised. See Oral Arg. Tr. 12:13–17 (“THE COURT: Well, when it says the stockholder voted, I assume that w e all agree that the statute means with respect to those shares. MR. REIMER: And I think it means with respect to those shares.”). 24 I use the term “share-tracing requirement” as a sh orthand for the burden that BMC suggests the statute imposes on appraisal petitioners; it is somewhat imprecise, as BMC suggests that the petitioner could meet the burden in a number of way s, some of which do not involve tracing— speaking strictly—the voting history of a particula r share, such as a post record-date purchaser of shares purchasing sufficient proxies to cover the n umber of shares for which it seeks appraisal. See infra note 53.9

According to BMC, the legislative purpose behind Se ction 262 favors an interpretation of the statute that includes a share -tracing requirement. Citing the appraisal statute’s origin as a reaction to the com mon-law rule whereby a single dissenting stockholder could prevent a merger, 25 BMC explains that “Section 262 represents ‘a limited legislative remedy . . . inte nded to provide shareholders, who dissent from a merger asserting the inadequacy of t he offering price, with an independent judicial determination of the fair valu e of their shares.’” 26 From this genesis, BMC extrapolates that it was always the Ge neral Assembly’s intent that “only shares that did not vote in favor of the merg er [be] eligible for appraisal under the language of Section 262.” 27 As further proof of an implicit share-tracing requi rement, BMC points to Section 262(e), as amended in 2007, which provides that: Within 120 days after the effective date of the mer ger or consolidation, any stockholder who has complied wit h the requirements of subsections (a) and (d) of this sec tion hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolid ation a statement setting forth the aggregate number of shares not vo ted in favor of the merger or consolidation and with respect to which d emands for appraisal have been received and the aggregate numb er of holders of such shares. 28

25 For a brief history of the appraisal statute, see In re Appraisal of Ancestry.com, Inc. , C.A. No. 8173-VCG, at 6–9 (Del. Ch. Jan. 5, 2015). 26 Opening Br. in Supp. of Resp’t’s Mot. for Summ. J. at 14 (quoting Ala. By-Products Corp. v. Neal , 588 A.2d 255, 256 (Del. 1991)). 27 Id. at 15. 28 8 Del. C. § 262(e).10

BMC concedes that subsection (e) is designed to be an informational tool “to permit dissenting stockholders ‘to learn how many s hares might qualify for appraisal,’” so that these dissenting stockholders might share t he costs of the appraisal action. 29 Nonetheless, BMC argues that the reference in thi s subsection specifically to “shares not voted in favor of the m erger or consolidation and with respect to which demands for appraisal have been re ceived” indicates the General Assembly’s intent that appraisal only be available for shares that can be shown to have not been voted in favor of the merger. In oth er words, BMC asks this Court to interpret the requirements of subsection (a) in light of the reference to specific shares in subsection (e), such that “not only does an appraisal petitioner carry the burden of showing that it ‘did not vote in favor of the merger,’ § 262(a), it also must show the shares for which it seeks appraisal a re ‘shares not voted in favor of the merger,’ § 262(e).” 30 Any other interpretation of the statute, BMC argu es, would not give effect to the statute’s purpose or a ll of its provisions, and, specifically, would frustrate the informational goa l of subsection (e). 31

29 Opening Br. in Supp. of Resp’t’s Mot. for Summ. J. at 15 (quoting H.R. 16, 131st Gen. Assembly 11, 63 Del. Laws c. 25, § 14 (Del. 1981) ( legislative synopsis)); see also Oral Arg. Tr. 5:21–6:3 (“[Subsection] (e) talks about there havin g—there needing to be—the information that can be obtained, which, of course, the legislature tells us is in order for the party seeking appraisal to know with whom they can share the cost s and so on, is to let them know how many shares might qualify for appraisal is the legislati ve purpose.”). 30 Opening Br. in Supp. of Resp’t’s Mot. for Summ. J. at 15–16. 31 See id. at 16 (“If any stockholder who did not itself vote in favor of the merger could seek appraisal for the shares it held at closing, withou t regard to how those shares were voted, then Section 262(e)’s statement of shares requirement wo uld be entirely superfluous, as it would not11

Finally, BMC argues that policy concerns dictate t hat this Court find an implicit share-tracing requirement in Section 262: [I]f an appraisal petitioner need only demonstrate that it did not vote in favor of the merger itself, . . . nothing would prevent a majority, or even all of a corporation’s shares from seeking app raisal, notwithstanding the fact that for a transaction to have been approved, at least a majority of the shares would have had to have been voted in favor of it. 32 Theoretically, BMC points out, absent a share-traci ng requirement “an appraisal arbitrageur, like Merion, [could] purchase[] most o r all of a corporation’s shares after the record date without securing proxies or r evocations of proxies, and then [seek] appraisal for those shares even though the r ecord-date holder voted them for the merger.” 33 Considering the purpose of Section 262 “to provid e a remedy to minority stockholders who dissented from the merger ,” such a possible outcome would be absurd, BMC argues, and must be precluded by construing the statute so that “only shares not voted in favor of a merger ar e eligible for appraisal.” 34 2. The Teachings of Transkaryotic

This case is not the first time this Court has visi ted the conflicts that arise when the alleged intent of the appraisal statute co llides with the realities of modern securities practice. In 2007, then-Chancellor Chan dler considered a similar, but

show ‘how many shares might qualify for appraisal.’ ” (quoting Cordero v. Gulfstream Dev. Corp. , 56 A.3d 1030, 1035–36 (Del. 2012))). 32 Id. at 16–17. 33 Id. at 17. 34 Id.12

factually distinct, situation in In re Appraisal of Transkaryotic Therapies, Inc. 35 In Transkaryotic , the record holder of stock, Cede, petitioned for appraisal on behalf of a group of beneficial owners for over ten millio n shares of a merger target, including over eight million shares that the benefi cial owners had acquired after

the record date but before the effective date of th e merger. 36 On a motion for partial summary judgment, the Court considered whet her “a beneficial shareholder, who purchased shares after the record date but before the merger vote, [must] prove, by documentation that each newly acquired sh are ( i.e. , after the record date) is a share not voted in favor of the merger by the previous beneficial

shareholder.” 37 Relying on the plain language of Section 262, as it existed at the time, the Court answered in the negative, determini ng that since “only a record holder . . . may claim and perfect appraisal rights ,” “it necessarily follows that the record holder’s actions determine perfection of the right to seek appraisal.” 38 Since

Cede held over 16 million shares that it did not vo te in favor of the merger, the Court concluded that Cede could, and did, perfect a ppraisal rights for all of the

beneficial owners’ 10 million shares. 39

35 2007 WL 1378345 (Del. Ch. May 2, 2007). 36 Id. at *1. 37 Id. at *3. 38 Id. 39 Id. at *4.13

In the wake of Transkaryotic , the General Assembly amended Section 262 to explicitly allow beneficial owners to directly f ile petitions for appraisal, 40 potentially raising questions about the continuing impact of the case. 41 Despite this fact, and despite that Transkaryotic is factually distinct from this case, both Merion and BMC argue that Transkaryotic supports their diametric positions. Merion highlights that the Transkaryotic decision rejected imposing a share-tracing requirement on Section 262 and underscores the Cour t’s discussion, en route to that holding, of the difficulties of tracing votes to specific shares due to the reality of modern securities practice, where most securitie s are “held in an undifferentiated manner known as ‘fungible bulk’” o n deposit at central securities depositories, such as DTC. 42 Conversely, BMC emphasizes the Court’s reliance i n its holding on Cede’s ability to prove it held an a mount of shares that had not been voted in favor of the merger greater than the amoun t being sought for appraisal, claiming this as proof that under Transkaryotic, “at a minimum, record holders like Merion bear the burden to show that the shares they seek to have appraised were not voted in favor of the merger.” 43

40 See 8 Del. C. § 262(e) (“Notwithstanding subsection (a) of this s ection, a person who is the beneficial owner of shares of such stock held eithe r in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition or request from the corporation the statement described in this subsection.”). 41 But see infra note 49. 42 Transkaryotic , 2007 WL 1378345, at *2. 43 Opening Br. in Supp. of Resp’t’s Mot. for Summ. J. at 22.14 II. STANDARD OF REVIEW Summary judgment is appropriate only where “the pl eadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. ” 44 In making that determination, the court must “view the facts in the light most fa vorable to the nonmoving party, and the moving party has the burden of demonstratin g that there is no material question of fact.” 45 The parties have agreed that there is no dispute as to the material facts of the case, and so the only issue t hat remains is whether, as a matter of law, Merion has met the statutory requirements o f Section 262.

III. ANALYSIS Merion is an arbitrageur which seeks to capitalize on what it perceives to be an undervalued transaction. Section 262 permits th e existence of appraisal arbitrage by allowing investors to petition for app raisal of stock purchased after a merger is announced. 46 The parties dispute whether the arbitrageur here has fully

44 Ch. Ct. R. 56(c). 45 E.g. , Transkaryotic , 2007 WL 137835, at *3 (quoting Elite Cleaning Co. v. Walter Capel and Artesian Water Co. , 2006 WL 1565161, at *3 (Del Ch. June 2, 2006)). 46 See 8 Del. C. § 262(a) (“Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation . . . shall be entitled to an appraisal by the Cou rt of Chancery of the fair value of the stockholder’s shares of stock . . . .” (emphasis added)); cf. Transkaryotic , 2007 WL 137835, at *5 (“Respondents raise one policy concer n that deserves mentioning. They argue that this decision will ‘pervert the goals of the apprai sal statute by allowing it to be used as an15

perfected its right to appraisal under the statute. Specifically, BMC asks this Court to determine whether Section 262 requires Merion to demonstrate that each share it seeks to have appraised is a share that was never v oted in favor of the merger, not just by itself, but by any owner. Because I find t hat the unambiguous language of the statute does not give rise to any such share-tr acing requirement, and that Merion has otherwise complied with the requirements of Section 262, I hold that Merion has perfected its right to appraisal. A. The Standing Requirements of Section 262 As mentioned above, in order to properly perfect th e appraisal remedy under the plain language of Section 262(a), a petitioner need only show that the record holder of the stock for which appraisal is sought: (1) “[held such] shares of stock on the date of the making of a demand pursuant to s ubsection (d) of this section with respect to such shares;” (2) “continuously [he ld] such shares through the effective date of the merger or consolidation;” (3) “has otherwise complied with subsection (d) of this section;” and (4) “has neith er voted [such shares] in favor of the merger or consolidation nor consented thereto i n writing.” 47 The statute’s requirements are directed to the stockholder —expressly defined as the record

investment tool for arbitrageurs as opposed to a st atutory safety net for objecting stockholders.’ That is, the result I reach here may, argue respond ents, encourage appraisal litigation initiated by arbitrageurs who buy into appraisal suits by free-r iding on Cede’s votes on behalf of other beneficial holders—a disfavored outcome. To the ex tent that this concern has validity, relief more properly lies with the Legislature. Section 2 62, as currently drafted, dictates the conclusion reached here.” (footnotes omitted)). 47 8 Del. C. § 262(a).16

holder —and whether it has owned the stock at the appropriate times, wheth er it has made a sufficient demand, and whether it has voted the shares it seeks to have appraised in favor of the merger. My interpretatio n of Section 262(a) as clear in that regard is consistent with Transkaryotic . In that case, then-Chancellor

Chandler determined that Cede did not have to demon strate that each individual share it sought to have appraised was a share it di d not vote in favor of the merger, but was only required to show that it held a quanti ty of shares it had not voted in favor of the merger equal to or greater than the qu antity of shares for which it sought appraisal. 48 The Court’s focus was on the petitioner/record holder , not on

the shares —in other words, on whether Cede had sufficient sha res it had not voted in favor of the merger to satisfy the demand, not w hether those specific shares were shares Cede had voted in favor of the merger. 49

48 See Transkaryotic , 2007 WL 137835, at *4 (“It is uncontested that Ce de voted 12,882,200 shares in favor of the merger and 16,838,074 agains t, abstained, or not voted in connection with the merger. It is further uncontested that Cede ot herwise properly perfected appraisal rights as to all of the 10,972,650 shares that petitioners own a nd for which appraisal is now sought. Thus, because the actions of the beneficial holders are i rrelevant in appraisal matters, the inquiry ends here. Cede, the record holder, properly perfected appraisal rights under §262. As a result, Cede may exercise appraisal rights for all 10,972,650 co ntested shares.”). 49 This principle is unaffected by the post- Transkaryotic amendment to Section 262(e) granting beneficial owners the right to file appraisal petit ions and receive a report of appraisal shares. In making this amendment, the General Assembly left th e standing requirements of Section 262(a) entirely untouched, including notably the statute’s definition of “stockholder” as “a holder of record.” 8 Del. C. § 262(a). Therefore, although procedurally a benef icial owner may now initiate the legal action, its substantive right to appraisal is still dependent on whether the record holder has perfected appraisal according to Section 262(a). For a more in-depth discussion of the status of Transkaryotic following the 2007 amendment, see In re Appraisal of Ancestry.com, Inc. , C.A. No. 8173-VCG, at 12–14 (Del. Ch. Jan. 5, 201 5).17

Contrary to BMC’s position, the meaning of the unam biguous language in Section 262(a) does not change in light of a readin g of Section 262(e), such that the two subsections together imply a limitation tha t only shares not voted in favor of the merger are eligible for appraisal and, conse quently, a requirement that the petitioner must identify how each share was voted. Subsection (e) of the appraisal statute exists to aid those seeking appraisal by, a mong other things, providing similarly situated petitioners with information tha t may aid in pooling resources and granting beneficial owners the ability to file appraisal actions. It is antithetical to that intention to interpret the language of subs ection (e) to impose, on the statute as a whole, an additional hurdle for appraisal peti tioners; rather, the effect of the language in subsection (e) referencing how individu al shares were voted is necessarily limited to defining the scope of the pe titioner’s informational right, in which that language is found. It is true, as BMC a rgues, that the language chosen by the General Assembly may theoretically be ineffe ctive, in light of appraisal arbitrage, in facilitating disclosure of the total number of shares for which appraisal is sought. At most, this fact indicates that the G eneral Assembly may not have picked a fail-safe method to achieve its goals; it may not have fully considered the theoretical possibility that shares acquired after the record date not voted in favor of the merger by the acquirer may nonetheless have been so voted by the seller, leading, hypothetically, to the number of shares fo r which appraisal is sought18

exceeding the number not voted for the merger. Thi s fact does not show that the General Assembly meant to impose an additional stan ding requirement for appraisal petitioners, let alone one that is contra ry to the plain language of Section 262(a). Had the General Assembly intended the stat ute to include a share-tracing requirement, I conclude it would have explicitly wr itten that requirement into the provision governing standing, subsection (a), rathe r than utilizing the backhanded method of introducing language in subsection (e)—a portion of the statute meant to enhance, not limit, rights to appraisal. 50 Finally, I do not consider it appropriate to weigh the public policy concern raised by BMC, namely that a failure of this Court to read a share-tracing requirement into the statute could allow “a majorit y, or even all of a corporation’s shares from seeking appraisal, notwithstanding the fact that for a transaction to have been approved, at least a majority of the shar es would have had to have been

voted in favor of it.” 51 It is undisputed that such a situation is not pre sent here: Merion has sought appraisal for 7,629,100 shares st emming from a transaction where 95,033,127 of the total 141,454,283 voting sh ares voted to approve the

merger. 52 As a member of the judicial branch, it is inappro priate for me to

50 See Giuricich v. Emtrol Corp. , 449 A.2d 232, 238 (Del. 1982) (“[W]here a provisi on is expressly included in one section of a statute, but is omitted from another, it is reasonable to assume that the Legislature was aware of the omissi on and intended it. The courts may not engraft upon a statute language which has been clea rly excluded therefrom by the Legislature.”). 51 Opening Br. in Supp. of Resp’t’s Mot. for Summ. J. at 16–17. 52 Sirkin Aff. Ex. 4, at 4.19

presume to rewrite an unambiguous statute to addres s a problem that has not occurred, may not occur, and, in any event, is cert ainly not before me now. 53 It may be true that the plain language of Section 262 does not adequately serve all the purposes of that statute. It is possible that appra isal arbitrage itself leads to unwholesome litigation. 54 However, in evaluating my role in alleviating the se

53 See, e.g. , In re Adoption of Swanson , 623 A.2d 1095, 1099 (Del. 1993) (“It is beyond th e province of courts to question the policy or wisdom of an otherwise valid law. Instead, each judge must take and apply the law as they find it, leaving any changes to the duly elected representatives of the people.” (internal citation omitted)); Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP , 80 A.3d 155, 160 (Del. Ch. 2013) (“[A]s has long been recognized by the Delaware Courts, when the General Assembly has addressed an issue within its authority with clarity, there is no policy gap for the court to fill. If a valid statute is not ambiguous, the court will apply the plain meaning o f the statutory language to the facts before it. It would usurp the authority of our elected branche s for this court to create a judicial exception to the words ‘all . . . privileges’ for pre-merger att orney-client communications regarding the merger negotiations. That sort of micro-surgery on a clear statute is not an appropriate act for a court to take.” (internal footnotes omitted)). Eve n assuming, arguendo , that the “over-appraisal” concern was before me in this case and I found it n ecessary to fix that problem, I would still be unclear as to the practical framework of the soluti on. BMC generally argues for a share-tracing requirement that would allow only shares not voted in favor of the merger to be appraised, but BMC does not champion any specific requirement; rat her, BMC suggests that an appraisal arbitrageur could satisfy this general burden in va rious ways, such as by purchasing its shares prior to the record date and itself voting the shar es, or by securing proxies or revocations of proxies for shares acquired after the record date. Opening Br. in Supp. of Resp’t’s Mot. for Summ. J. at 26–27. The fact that multiple avenues exist to remedy what Merion sees as a problem with the statute—none of which have been ve tted by the General Assembly—further illustrates that BMC’s concern requires legislative , not judicial, deliberation. 54 But see Minor Myers & Charles R. Korsmo, Appraisal Arbitrage & the Future of Public Company M&A , 92 Wash. U. L. Rev. (forthcoming 2015), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id= 2424935 (arguing that the recent rapid growth in appraisal arbitrage should be welcomed as a benefit to stockholders and corporate law generally, because empirical evidence suggests “app raisal arbitrage focuses private enforcement resources on the transactions that are most likely to deserve scrutiny, and the benefits of this kind of appraisal accrue to minority shareholders even w hen they do not themselves seek appraisal”); George S. Geis, An Appraisal Puzzle , 105 Nw. U. L. Rev. 1635, 1661–77 (2011) (suggesti ng that expanded appraisal rights could serve as a “back-en d market check on controller abuses,” whereby, “if the controller hopes to expropriate va lue from minority shareholders through a cutrate offer, outside investors will have incentives to purchase the shares and seek appraisal under20

concerns through the adjudication of this case, I f ind former Chancellor Chandler’s

words in Transkaryotic —wherein over seven years ago he considered whether his decision would “pervert the goals of the appraisal statute by allowing it to be used as an investment tool for arbitrageurs”—to be parti cularly apposite: To the extent that [these] concern[s] ha[ve] validi ty, relief more properly lies with the Legislature. Section 262, a s currently drafted, dictates the conclusion reached here. . . . The Leg islature, not this Court, possesses the power to modify § 262 to avoid the evil[s], if [they are] evil[s], that purportedly concern[] [the Respondent]. 55 B. Application of Standing Requirements Having not found any implicit share-tracing requir ement present in the statute, I turn to the four explicit standing requi rements set forth in Section 262(a). It is undisputed that Merion has satisfied all of t hese requirements. Merion made a written demand for appraisal of 7,629,100 shares of BMC common stock on July 22, 2013, at which time it held all shares for whic h it sought appraisal. The appraisal demand Merion delivered to BMC was timely and sufficiently informative. After delivering its demand for appra isal of the 7,629,100 shares of BMC common stock that it owned, Merion continued to hold those shares throughout the date that the merger of BMC into Box er became effective, on September 10, 2013. Finally, at no point did Merio n ever vote any of the shares

Transkaryotic ,” but arguing that, in order to curb meritless lit igation, the appraisal statute should be amended to include an embedded put option). 55 In re Appraisal of Transkaryotic Therapies, Inc. , 2007 WL 137835, at *5 (Del. Ch. May 2, 2007).21

for which it seeks appraisal in favor of the BMC/Bo xer merger. Consequently, Merion has perfected its right to have its 7,629,10 0 shares of BMC common stock appraised by this Court.

IV. CONCLUSION For the foregoing reasons, BMC’s Motion for Summar y Judgment is denied. An appropriate order accompanies this Opinion.22

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

MERION CAPITAL LP and MERION CAPITAL II LP, Petitioners, ) ) ) )

v. ) ) ) C.A. No. 8900-VCG BMC SOFTWARE, INC.,

Respondent. )

) ) )

ORDER AND NOW, this 5th day of January, 2015, The Court having considered the Respondent’s Motion for Summary Judgment, and for the reasons set forth in the Memo randum Opinion dated January 5, 2015, IT IS HEREBY ORDERED that the Respondent’s Motion is DENIED.

SO ORDERED:

/s/ Sam Glasscock III Vice Chancellor