Opinion ID: 2602071
Heading Depth: 1
Heading Rank: 7

Heading: In an Appraisal Action, the Court Assumes the Validity of the Merger

Text: ¶17 By statute, shareholders in Delaware corporations are entitled to a judicial determination or appraisal of the fair value of their shares in the event of a merger. [8] In Cede & Co. v. Technicolor , the Supreme Court of Delaware defined an appraisal action as a limited legislative remedy intended to provide shareholders dissenting from a merger on grounds of inadequacy of the offering price with a judicial determination of the intrinsic worth (fair value) of their shareholdings. [9] The statute provides that the Court shall determine the fair value of the shares exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation and the court shall consider all relevant factors. [10] The court values the corporation as an entity, not merely as a collection of assets, or by the sum of the market price of each share of its stock. Moreover, the corporation must be viewed as an on-going enterprise, occupying a particular market position in the light of future prospects. [11] Although an appraisal action challenges the adequacy of the price paid for the plaintiff's shares, it does not challenge the validity of the merger transaction itself, and rescission is not an available remedy. The only remedy available is an award for damages for the difference between the court-determined fair value and the price that was actually paid for the plaintiff's shares. [12] The court derives the fair value of the plaintiff's shares by assessing the value of the entire company and then dividing that value by the plaintiff's proportionate share. [13] Therefore, the court in an appraisal action assumes the validity of the merger and focuses exclusively on the fair value of the shareholder's shares. [14]