Court Opinion

ID: 4575854
Source: CourtListenerOpinion
Date Created: 2020-10-12 22:02:22.271425+00
Date Added: 2024-06-11T13:32:12.961951
License: Public Domain

IN THE SUPREME COURT OF THE STATE OF DELAWARE

BRIGADE LEVERAGED CAPITAL               §
STRUCTURES FUND LTD. and                §
BRIGADE DISTRESSED VALUE                §
MASTER FUND LTD.,                       §
                                        §        No. 427, 2019
            Petitioners Below,          §
            Appellants,                 §
                                        §        Court Below – Court of Chancery
            v.                          §        of the State of Delaware
                                        §
STILLWATER MINING COMPANY,              §
                                        §        C.A. No. 2017-0385-JTL
            Respondent Below,           §
            Appellee.                   §

                       Submitted: July 15, 2020
                        Decided: October 12, 2020

Before SEITZ, Chief Justice; VAUGHN, and MONTGOMERY-REEVES,
Justices.

Upon appeal from the Court of Chancery. AFFIRMED.

Samuel T. Hirzel, Esquire, Elizabeth A. DeFelice, Esquire, HEYMAN ENERIO
GATTUSO & HIRZEL LLP, Wilmington, Delaware; Lawrence M. Rolnick,
Esquire, Steven M. Hecht, Esquire, ROLNICK KRAMER SADIGHI LLP, New
York, New York, for Petitioners-Appellants.

S. Mark Hurd, Esquire, Lauren Neal Bennett, Esquire, MORRIS, NICHOLS,
ARSHT & TUNELL LLP, Wilmington, Delaware; James R. Warnot, Jr., Esquire,
Adam S. Lurie, Esquire, Brenda D. DiLuigi, Esquire, Nicole E. Jerry, Esquire,
Elizabeth M. Raulston, Esquire, LINKLATERS LLP, New York, New York, for
Respondent-Appellee.
MONTGOMERY-REEVES, Justice:

      On May 4, 2017, Sibanye Gold Ltd. (“Sibanye”) acquired Stillwater Mining

Co. (“Stillwater”) through a reverse triangular merger. Under the terms of the

merger agreement, each Stillwater share at closing was converted into the right to

receive $18 of merger consideration. Between the signing and the closing of the

merger, the commodity price for palladium, which Stillwater mined, increased by

nine percent, improving Stillwater’s value.

      Certain former Stillwater stockholders dissented to the merger, perfected their

statutory appraisal rights, and pursued this litigation. During the appraisal trial,

petitioners argued that the flawed deal process made the deal price an unreliable

indicator of fair value and that increased commodity prices raised Stillwater’s fair

value substantially between the signing and closing of the merger. On August 21,

2019, the Court of Chancery issued its memorandum opinion (the “Memorandum

Opinion”), holding that the $18 per share deal price was the most persuasive

indicator of Stillwater’s fair value at the time of the merger. The court did not award

an upward adjustment for the increased commodity prices.

      The petitioners now appeal the Court of Chancery’s decision, arguing that the

court abused its discretion when it ignored the flawed sale process and petitioners’

argument for an upward adjustment to the merger consideration.

                                          2
      Having reviewed the parties’ briefs and the record on appeal, and after oral

argument, this Court holds that the Court of Chancery did not abuse its discretion

when it deferred to the deal price as a reliable indicator of fair value without an

upward adjustment. Therefore, this Court affirms the Court of Chancery’s August

21, 2019 Memorandum Opinion and September 27, 2019 Post-Trial Judgment order.

      I.     BACKGROUND1

      Stillwater Mining Company was a publicly traded Delaware corporation

primarily engaged in the business of mining and processing platinum group metals

(“PGMs”) from the J-M Reef in Montana. The J-M Reef is the only PGM mine in

the United States, with the only other significant deposits located in South Africa

and Russia. Stillwater has two producing mines at the J-M Reef, Stillwater Mine

and East Boulder.2 Stillwater also owns one of the largest PGM recycling operations

in the world, which provides additional market supply of PGMs.3 In light of its

operations, Stillwater’s common stock trading price is heavily influenced by the spot

and forward pricing of the PGM palladium.4

      By October 2015, Stillwater’s board of directors (the “Board”) and

management had become concerned that both the palladium and platinum markets

1
  This Court takes the essential facts from the Memorandum Opinion. In re Stillwater
Mining Co., 2019 WL 3943851 (Del. Ch. Aug. 21, 2019).
2
Id. at *2.
3
  Appendix to the Opening Br. 425, 1283 (hereafter “A_”).
4
  Stillwater Mining, 2019 WL 3943851, at *2.
                                         3
were facing long-term “structural decline[s],”5 largely due to the decline in gasoline

and diesel-powered automotive markets, the primary end-use of Stillwater’s PGMs.6

Accordingly, the Board began to consider strategic alternatives, including a merger

of equals or the sale of some of Stillwater’s business operations.7

      In 2016, the Board’s fears materialized as Stillwater’s stock price declined,

reflecting a decrease in the spot price of palladium that continued throughout the

year. Due to the downturn in the trading price, the Board authorized Michael

McMullen, Stillwater’s CEO and board member, to inquire into strategic

opportunities and report back to the Board.8 Also around this time, McMullen

privately expressed unease at the company’s situation and began considering his exit

from Stillwater.9

      A. McMullen Engages with Sibanye

      On January 30, 2016, Sibanye requested a meeting to discuss the acquisition

of Stillwater.10 Without the Board’s knowledge or approval, McMullen met with

Neal Froneman, Sibanye’s CEO, on March 1, 2016.11 At the meeting, McMullen

asked Froneman to provide “an informal proposal” that included “an idea of

5
  A2439.
6
  A2438-41; A1854-55.
7
  Appendix to the Answering Br. 30-31, 311 (hereafter “B_”).
8
  Stillwater Mining, 2019 WL 3943851, at *4.
9
Id. at *5.
10
 Id.
11
 Id.
                                           4
valuation” and “transaction structure.”12 He told Froneman that any potential

acquisition would need to feature “a large cash component.”13 McMullen also stated

that Stillwater would need to “be priced at a premium of 30% over Stillwater’s thirty-

day volume-weighted average price (‘VWAP’).”14 After the meeting, Froneman had

the impression that a deal “was doable if we got the valuation right.”15 McMullen

took these actions without involving the Board, and he did not inform the Board

about his discussions with Sibanye at the Board’s next regularly scheduled meeting

in May 2016.16

      By July 2016, Stillwater’s stock price and the price of palladium had largely

recovered.    On July 21, 2016, Sibanye provided a preliminary, non-binding

indication of interest at $15.75 per share in cash.17 Shortly thereafter, on July 27 and

28, 2016, Stillwater’s Board met in “executive session” with McMullen to discuss

Sibanye’s offer.18    On August 9, 2016, Stillwater executed a confidentiality

agreement with Sibanye and provided Sibanye data room access.19

12
Id.
13
 Id.
14
Id. at *5.
15
Id.
16
 Id. at *5-6.
17
 Id. at *6.
18
 Id. at *7; B1088-94.
19
   Stillwater Mining, 2019 WL 3943851, at *7; A1856; A2458-59.
                                           5
      B. Stillwater Engages with Other Parties

       On August 10, 2016, the Board met and directed management to begin

outreach to other potentially interested parties.20 But instead of working to generate

“as much interest as possible” in a transaction with Stillwater, McMullen continued

to focus on courting Sibanye.21 Nonetheless, Stillwater’s management met with

Bank of America Merrill Lynch (“BAML”) on August 18, 2016, to discuss potential

options.22 At that meeting, BAML got “the sense . . . that a sale was a possibility”

and independently contacted a list of fifteen potential acquirers about purchasing

Stillwater.23 Meetings were arranged with a number of interested parties, including

Hecla, Coeur, Kinross, and Gold Fields.24 By early October, both Hecla and Coeur

conducted site visits and obtained access to the data room.25

      On October 3, 2016, the Board met, reviewed a list of eighteen potential

acquirers, and directed McMullen to solicit proposals from investment banks and

create an internal cash flow model to value the company.26 Additionally, Brent

Wadman, Stillwater’s General Counsel, recommended that the Board form a special

committee to oversee the sale process. Since the July 2016 meeting between

20
   Stillwater Mining, 2019 WL 3943851, at *7.
21
Id.
22
Id.
23
 Id.
24
Id. at *7-8.
25
Id. at *8; B40-41; B1095-96.
26
   Stillwater Mining, 2019 WL 3943851, at *8-9.
                                          6
McMullen and Sibanye, Wadman had become concerned that McMullen was

rushing the sale process to facilitate his exit from the company.27 The Board sought

the advice of external counsel, Holland & Hart LLP, as to whether any conflicts

existed and whether a special committee should be formed.28 With Holland & Hart

LLP’s advice, the Board determined that no conflicts of interest existed at that time.29

The Board formally retained BAML on November 7, 2016, and BAML immediately

conducted a market check.30 On November 11, 2016, the Board retained Jones Day

for its “substantial experience in advising Delaware publicly traded companies in

respect of potential strategic transactions.”31

       By the next Board meeting on November 23, 2016, twenty-four parties had

received some type of formal or informal contact from BAML or Stillwater

management. Four of those parties accessed the data room, four conducted site

visits, and one, Sibanye, submitted an indication of interest.32 McMullen informed

the Board that he viewed Sibanye’s initial offer of $15.75 per share as insufficient.33

At the Board’s direction, BAML reached out to additional parties, and one, Northam,

27
Id. at *9.
28
 Id.
29
Id.
30
Id. at *10.
31
 Id.
32
 Id. at *11-12.
33
Id. at *12.
                                           7
signed a non-disclosure agreement and accessed the data room.34          Two other

parties—Northern Star and Independence—informed Stillwater that they were only

interested in a merger of equals.35

       On December 1, 2016, Sibanye revised its offer to $17.50-$17.75 per share in

cash.36 On December 2, 2016, Stillwater’s Board rejected the revised offer.37 That

same day, BAML provided its internal discounted cash flow model valuing the

company between $10.78 and $14.14 per share.38 BAML also provided a financial

analysis of the two merger of equals proposals from Northern Star and

Independence.39     After reviewing the financial analysis, the Board ultimately

determined not to pursue either merger of equals transaction, finding neither tenable

for a number of reasons.40

       On December 3, 2016, Sibanye made its “best and final” offer of $18 per share

to acquire Stillwater.41 The $18 price represented a 22.6% premium over the

unaffected trading price and a 24.4% premium over the 30-day volume-weighted

average price.42 At this point, although five parties had signed nondisclosure

34
Id. at *13.
35
Id. at *12.
36
 Id. at *13.
37
Id. at *13-14.
38
 Id. at *14.
39
Id.
40
Id.
41
Id. at *15.
42
 Id. at *16.
                                         8
agreements and gained access to Stillwater’s non-public information, Sibanye was

the only party to make a bid.43

       C. Stillwater Signs with Sibanye

       On December 8, 2016, BAML provided an opinion to the Board that

Sibanye’s offer was fair to stockholders.44 The Board considered BAML’s fairness

opinion in its deliberations, approved the merger, and signed the merger

agreement.45 The transaction was publicly announced on December 9, 2016.46

       In March 2017, Wadman resigned as general counsel. Wadman’s resignation

letter cited his concerns about how the deal process unfolded and his belief that

McMullen used the process to engage in self-dealing.47 Stillwater negotiated a

settlement with Wadman, and the company issued a statement that did not mention

the reasons for his resignation.48

       During the 138 days between the signing and the stockholder vote, no other

bidder made a topping bid over $18 per share, but the price of palladium and

Stillwater’s trading price increased during that time.49 Still, on April 26, 2017,

43
Id. at *15.
44
Id.
45
 Id. at *15-16.
46
Id. at *16.
47
 Id. at *17.
48
 Id.
49
Id.
                                          9
approximately 75% of the issued outstanding shares eligible to vote approved the

merger.50 On May 4, 2017, the sale of Stillwater to Sibanye closed.51

       D. Appraisal Litigation

       On May 22, 2017, appellants, petitioners-below, initiated this appraisal

litigation.52 The Court of Chancery conducted a four-day trial and held post-trial

argument on May 1, 2019.

       On August 21, 2019, the court issued its Memorandum Opinion.53 The Court

of Chancery held that “Sibanye proved that the sale process was sufficiently reliable

to make the deal price a persuasive indicator of fair value.”54 Further, the court stated

that while “[t]he evidence demonstrated that Stillwater’s trading price could provide

a persuasive indicator of value, . . . it was a less persuasive indicator than the deal

price.”55 It also held that “[n]either side proved that its DCF valuation provided a

persuasive indicator of fair value. The experts disagreed over too many inputs, and

the resulting valuation swings were too great, for [the court] to rely on a model when

a market-tested indicator is available.”56 Thus, the court deferred to the merger price

50
Id.
51
 Id.
52
Id. at *17.
53
 Id. at *1.
54
 Id.
55
Id.
56
Id.
                                           10
of $18 per share as the most reliable indicator of Stillwater’s fair value.57 It also

declined to make an upward adjustment to the price to account for Stillwater’s

increase in value after signing, holding that petitioners did not prove that they were

entitled to a deal price adjustment.58 On September 27, 2019, the Court of Chancery

entered its Post-Trial Judgment order.

      E. Petitioners Appeal the Court’s Memorandum Opinion and Order

      On October 8, 2019, Petitioners filed a timely Notice of Appeal. On appeal,

Petitioners argue that the Court of Chancery abused its discretion by ignoring the

flawed sale process and holding that the deal price of $18 per share reflected

Stillwater’s fair value at closing.59 Further, Petitioners argue that the court relied on

an incorrect conclusion to justify its decision to not adjust the deal price upward to

account for rising commodity prices.60

      Sibanye responds that the Court of Chancery correctly examined Stillwater’s

sale process and held that the process presented sufficient indicia of reliability,

making the deal price the best indicator of Stillwater’s fair value.61 Further, it argues

that because Petitioners’ arguments concerning the deal price adjustment were

wholly conclusory, the court correctly held that Petitioners “failed to prove . . . ‘that

57
Id.
58
Id. at *50.
59
   Opening Br. 38-40.
60
Id. at 26.
61
   Answering Br. 18-20.
                                           11
the deal price should be adjusted upward to reflect a change in value between signing

and closing.’”62

      On review, this Court holds that the Court of Chancery did not abuse its

discretion when it relied on the deal price as the most reliable indicator of

Stillwater’s fair value. Nor did the Court abuse its discretion when it declined to

adjust the deal price.

      II.    STANDARD OF REVIEW

      This Court reviews errors of law de novo.63 We review statutory appraisal

awards for abuse of discretion and “grant significant deference to the factual findings

of the trial court.”64 “So long as the Court of Chancery has committed no legal error,

its factual findings will not be set aside on appeal unless they are clearly wrong and

the doing of justice requires their overturn.”65 “We defer to the trial court’s fair

value determination if it has a ‘reasonable basis in the record and in accepted

financial principles relevant to determining the value of corporations and their

stock.’”66

62
Id. at 29 (quoting Stillwater Mining, 2019 WL 3943851, at *50).
63
   SmithKline Beecham Pharms. Co. v. Merck & Co., 766 A.2d 442, 447 (Del. 2000).
64
   DFC Glob. Corp. v. Muirfield Value P’rs, 172 A.3d 346, 363 (Del. 2017).
65
   Montgomery Cellular Hldg. Co. v. Dobler, 880 A.2d 206, 219 (Del. 2005).
66
   Dell, Inc. v. Magnetar Glob. Event Driven Master Fund Ltd., 177 A.3d 1, 5-6 (Del. 2017)
(quoting DFC, 172 A.3d at 348-49).
                                           12
       III.   ANALYSIS

       Under 8 Del. C. § 262(a), a dissenting stockholder to a merger “shall be

entitled to an appraisal by the Court of Chancery of the fair value of the stockholder’s

shares of stock.” In an appraisal proceeding, the Court of Chancery must “determine

the fair value of the shares exclusive of any element of value arising from the

accomplishment or expectation of the merger or consolidation, together with

interest, . . . to be paid upon the amount determined to be the fair value.”67 “To reach

this per-share valuation, the court should first envisage the entire pre-merger

company as a ‘going concern,’ as a standalone entity, and assess its value [on the

closing date of the merger] as such.”68 “Then, once this total standalone value is

determined, the court awards each petitioning stockholder his pro rata portion of this

total—his proportionate interest in [the] going concern plus interest.”69

       When determining a company’s fair value in an appraisal, “the Court shall

take into account all relevant factors.”70 Although “[t]he value of a corporation is

not a point on a line, but [instead] a range of reasonable values,” the court must

“assign one particular value within this range as the most reasonable value in light

67
   8 Del. C. § 262(h).
68
   Dell, 177 A.3d at 20.
69
Id. at 21 (citations and internal quotation marks omitted).
70
   8 Del. C. § 262(h).
                                             13
of all the relevant evidence and based on considerations of fairness.”71           “In

discharging its statutory mandate, the Court of Chancery has discretion to select one

of the parties’ valuation models as its general framework or to fashion its own.”72

But, “[i]n the end, the trial judge must determine fair value, and ‘fair value is just

that, “fair.” It does not mean the highest possible price that a company might have

sold for.’”73

       A. The Court of Chancery Did Not Abuse its Discretion when it Held that
          the Deal Price was the Best Evidence of Stillwater’s Fair Value
       Petitioners first argue that “[t]he court below erroneously concluded that the

flawed sale[] process was sufficient to defer completely to merger price.”74

Petitioners allege that instead of analyzing the actual merger process in accordance

with this Court’s precedent, the Court of Chancery “constructed a made-up deal

process—involving only a single bidder—to speculate that if this Court would defer

completely to merger price in that (more extreme) scenario, it would likely uphold a

merger-price determination here, despite the significant process deficiencies.”75

Thus, Petitioners contend that the Court of Chancery disregarded “the facts of this

71
   Cede & Co. v. Technicolor, Inc., 2003 WL 23700218, at *2 (Del. Ch. Dec. 31, 2003,
revised July 9, 2004), aff’d in part, rev’d in part on other grounds, 884 A.2d 26 (Del.
2005).
72
   M.G. Bancorp., Inc. v. Le Beau, 737 A.2d 513, 525-26 (Del. 1999).
73
   Fir Tree Value Master Fund, LP v. Jarden Corp., 2020 WL 3885166, at *7 (Del. Jul. 9,
2020) (quoting DFC, 172 A.3d at 370) (citing Dell, 177 A.3d at 20).
74
   Opening Br. 5.
75
Id. at 37.
                                          14
case” and “failed to analyze the sale[] process for Stillwater to determine whether it

provided reliable evidence of third-party market valuation.”76

         Here, contrary to Petitioners’ representations, the Court of Chancery

examined Stillwater’s sale process, explained its reasoning, and grounded its

conclusions in the relevant facts and law. The court dedicated 56 pages of its 139-

page decision to examining the reliability of the deal price. The court walked

through each step of the sale process, found that there were objective indicia of

reliability, and addressed each of Petitioners’ arguments concerning alleged defects

in the pre- and post-signing phases. After conducting this analysis, the court held

that although Stillwater’s sale was “rough and ready,” “given the arm’s-length nature

of the Merger, the premium over market, and the substance of what took place during

the sale process, it is not possible to say that an award at the deal price would result

in the petitioners being exploited.”77 This Court cannot hold that the Court of

Chancery abused its discretion in reaching this conclusion based on the record before

us.

            1. The Court of Chancery determined that the sale process provided
               objective indicia of reliability

         This Court has recently examined instances when sale processes provided

persuasive evidence of fair value. In DFC, Dell, and Verition Partners Master Fund

76
Id.
77
     Stillwater Mining, 2019 WL 3943851, at *44.
                                            15
Ltd. v. Aruba Networks, Inc.,78 this Court looked to objective factors that bolstered

the reliability of the sale process and gave considerable weight to the deal price. In

DFC, this Court considered a sale process where

             i) the transaction resulted from a robust market search that
             lasted approximately two years in which financial and
             strategic buyers had an open opportunity to buy without
             inhibition of deal protections; ii) the company was
             purchased by a third party in an arm’s length sale; and iii)
             there was no hint of self-interest that compromised the
             market check.79

This Court concluded that “the best evidence of fair value was the deal price, as it

resulted from an open process, informed by robust public information, and easy

access to deeper, non-public information, in which many parties with an incentive

to make a profit had a chance to bid.”80 In so holding, this Court noted that the

             refusal to craft a statutory presumption in favor of the deal
             price when certain conditions pertain does not in any way
             signal [this 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.81

78
   210 A.3d 128, 135 (Del. 2019).
79
172 A.3d at 349.
80
Id.
81
 Id. at 366.
                                          16
      Likewise, in Dell, this Court determined that the deal price deserved deference

when “Dell’s sale process bore many of the same objective indicia of reliability”

present in DFC.82 Specifically, this Court reasoned that

             when the evidence of market efficiency, fair play, low
             barriers to entry, outreach to all logical buyers, and the
             chance for any topping bidder to have the support of Mr.
             Dell’s own votes is so compelling, then failure to give the
             resulting price heavy weight . . . abuses even the wide
             discretion afforded the Court of Chancery in these difficult
             cases.83

Thus, this Court in Dell held that, due to the objective indicia of reliability, “the deal

price deserved heavy, if not dispositive, weight.”84

      Finally, in Aruba this Court noted “the long history of giving important weight

to market-tested deal prices in the Court of Chancery and this Court”85 and

underscored that “a buyer in possession of material nonpublic information about the

seller is in a strong position (and is uniquely incentivized) to properly value the seller

when agreeing to buy the company at a particular deal price.”86 The Court concluded

that the buyer’s “view of value should be given considerable weight by the Court of

82
   Dell, 177 A.3d at 28.
83
Id. at 35.
84
Id. at 23.
85
   Verition P’rs Master Fund Ltd. v. Aruba Networks, Inc., 210 A.3d 128, 135 (Del. 2019);
see also id. at 135 n.41 (collecting cases).
86
Id. at 137.
                                           17
Chancery absent deficiencies in the deal process” because the buyer had access to

nonpublic information and was able and incentivized to properly value the target.87

       Using the above decisions as guidance, the Court of Chancery examined

Stillwater’s sale process and determined that it also presented “‘objective indicia’

that ‘suggest[ed] that the deal price was a fair price.’”88 The court highlighted five

key objective indicators that supported the reliability of Stillwater’s sale process: (1)

“the Merger was an arm’s length transaction with a third party”; (2) “the Board did

not labor under any conflicts of interest”; (3) the buyer “conducted due diligence and

received confidential information about Stillwater’s value”; (4) Stillwater

“negotiated . . . multiple price increases”; and (5) “no bidders emerged during the

post-signing phase.”89 This Court has held that each of these indicators reflected a

trustworthy process when evaluating the sale processes in DFC, Dell, and Aruba.90

Although these indicators are fewer indicia of fairness than this Court identified

when reviewing the sale processes in DFC, Dell, or Aruba, the court did not abuse

87
Id.
88
   Stillwater Mining, 2019 WL 3943851, at *22 (quoting Dell, 177 A.3d at 28).
89
Id. at *22-23.
90
   See, e.g., DFC, 172 A.3d at 349 (noting as persuasive that “the company was purchased
by a third party in an arm’s length sale”); Dell, 177 A.3d at 28 (crediting the deal price
because the special committee was “composed of independent, experienced directors and
armed with the power to say ‘no’” and the special committee “persuaded Silver Lake to
raise its bid six times”); id. at 33 (finding that absence of higher bid meant “that the deal
market was already robust and that a topping bid involved a serious risk of overpayment,”
which “suggests the price is already at a level that is fair”); Aruba, 210 A.3d at 137
(emphasizing that the buyer was armed with “material nonpublic information about the
seller is in a strong position (and is uniquely incentivized) to properly value the seller”).
                                             18
its discretion by determining that “the objective indicia that were present provide a

cogent foundation for relying on the deal price as a persuasive indicator of fair

value.”91

            2. The Court of Chancery considered and rejected Petitioners’
               objections to the pre-signing process

       Having identified the objective signs that the deal price was a reliable

indicator of fair value, the Court of Chancery also addressed and rejected each of

Petitioners’ several arguments for why the pre-signing process undermined that

reliability.92

       First, the court considered Petitioners’ claim that McMullen’s role in the pre-

signing process and the Board’s lack of “meaningful oversight” during that period

sullied the reliability of the sale process.93 The court acknowledged that aspects of

the process, including McMullen’s early unsupervised activities and the lack of

Board involvement until later in the sale discussions, presented “flaws.”94 It held,

however, that “[t]hose flaws are factors to consider, but they do not undermine the

reliability of the sale price” because BAML’s pre-signing canvas, the repeated

rejections of Sibanye’s offers, and an effective post-signing market check ensured a

91
   Stillwater Mining, 2019 WL 3943851, at *23.
92
Id. at *23-44.
93
Id. at *30-34.
94
Id. at *31.
                                          19
sufficient degree of reliability.95 Therefore, the suboptimal executive and board

involvement early on did “not inherently disqualify the sale process from generating

reliable evidence of fair value.”96

      Second, the court held that although McMullen’s pursuit of the merger

“appears to have been motivated by his desire to maximize his personal wealth and

retire,” those personal interests did not undermine the sale process. 97 Instead, the

court determined that McMullen’s financial and personal interests were aligned with

stockholders’ desire to maximize the company’s value.98 And “[w]hen Sibanye

indicated interest at $15.75 per share in July 2016, McMullen did not rush to sign up

a deal[,]” evidencing his commitment to extract the highest possible price for the

company.99 Further, the court noted that “McMullen’s personal interests as a whole

do not appear materially different from interests that have not been sufficient in other

cases to undermine the reliability of sale processes.”100 Thus, McMullen’s personal

interests did not lead him or the Board “to accept a deal price that left a portion of

95
Id. at *44.
96
Id. at *31.
97
Id. at *33.
98
 Id. at *34.
99
Id.
100
Id. Specifically, the Court of Chancery compared McMullen’s potential conflicts with
disputed conflicts addressed by this Court’s decisions in Aruba, 210 A.3d at 141-42, and
Dell, 177 A.3d at 32-34. Stillwater Mining, 2019 WL 3943851, at *33.
                                          20
Stillwater’s fundamental value on the table, particularly in light of the effective post-

signing market check that Stillwater conducted.”101

       Third, the court analyzed Stillwater’s initial “soft sell” approach and BAML’s

pre-signing market check.            The court determined that although “the

‘soft sell’ strategy was not an effective means of generating interest in the

Company,” it “did not do anything to harm either BAML’s abbreviated pre-signing

process or the post-signing market check.”102 BAML reached out to fourteen parties

once it was retained, and seven parties engaged to some degree in the process.103

While Petitioners “have criticized the timing, pacing, and scope of the pre-signing

process, . . . it resulted in BAML contacting the ‘logical strategic buyers’ before

Stillwater signed up its deal with Sibanye.”104 Further, “[t]he number of meaningful

contacts compares favorably with or is similar to the facts in the Delaware Supreme

Court precedents.”105 Thus, while the “abbreviated pre-signing process was not

ideal,” the court concluded that it was still “a positive factor for the reliability of the

sale process.”106

101
    Stillwater Mining, 2019 WL 3943851, at *34.
102
Id.
103
Id. at *35.
104
    Id. (quoting Aruba, 210 A.3d at 136).
105
    Id. (citing Aruba, 210 A.3d at 136-39, 142; Dell, 177 A.3d at 28; DFC, 172 A.3d at 350,
355, 376).
106
Id. at *36.
                                            21
       Fourth, and finally, the court rejected Petitioners’ argument that “Sibanye

pressured Stillwater to sign a merger agreement before the company’s rising stock

price made what Sibanye was willing to pay look inadequate.”107 Sibanye conducted

due diligence before signing, received access to material non-public information,

and was uniquely incentivized to value Stillwater properly. When Sibanye made its

final offer of $18 per share, it “could have deployed cash on hand or drawn on its

revolving line of credit” to increase that offer if its own valuation supported such an

increase; it did not. 108 “That Sibanye did not bid higher does not mean that the price

it agreed to pay did not reflect fair value when its bid prevailed.”109 Moreover,

Stillwater twice rejected Sibanye’s lower offers before accepting a deal for $18 per

share. As such, the court held that “[t]he negotiations between Stillwater and

Sibanye over price, together with Sibanye’s refusal to pay more, provide[] strong

evidence of fair value.”110

       Thus, the court considered each of Petitioners’ arguments concerning the pre-

signing process. This Court is satisfied that the Court of Chancery did not abuse its

discretion when it held that the pre-signing process was sufficient to support reliance

on the deal price as evidence of fair value.

107
Id. at *36, *36-38.
108
 Id. at *38.
109
Id.
110
Id.
                                          22
           3. The Court of Chancery considered and rejected Petitioners’
              objections to the post-signing process
       The Court of Chancery also considered Petitioners’ “relatively few” claims

challenging the terms of the Merger Agreement and the Board’s decisions during the

post-signing period.111

       Because the market price of palladium increased between signing and closing,

Petitioners complained that “the Merger Agreement ‘provided no practical way for

Stillwater’s stockholders to receive that additional value.’”112 But the Court of

Chancery dismissed those arguments as contradictory to the terms of the contract

itself. According to the court, the Merger Agreement was not designed “to give the

stockholders the benefit of a transaction that included the potential upside or

downside that would result from changes in the price of palladium after signing. The

Merger Agreement was trying to provide stockholders with the ability to opt for the

comparative certainty of deal consideration equal to $18.00 per share.”113 Moreover,

the court held that the challenge to the Merger Agreement failed because Stillwater’s

stockholders were not wholly barred from capitalizing on rising palladium prices; as

a practical matter, “[i]f Stillwater’s stockholders had wanted to capture the increased

111
Id. at *38.
112
Id.
113
Id. at *39.
                                          23
value of palladium, then they could have voted down the Merger and kept their

shares.”114

       The court also rejected Petitioners’ argument that the no solicitation provision

and matching rights “deterred interested buyers from making a topping bid.”115 The

court compared the deal protections here to the “similar suite of deal protections” in

Aruba and held that, as in Aruba and other cases, these protections “did not preclude

or impermissibly impede a post-signing market check.”116 Potential bidders had 138

days to submit a competing bid. “The absence of a higher bid indicates ‘that the deal

market was already robust and that a topping bid involved a serious risk of

overpayment,’ which in turn ‘suggests the price is already at a level that is fair.’”117

       Last, the Court of Chancery addressed Petitioners’ argument that “the

stockholders approved the Merger based on incomplete and misleading

information.”118 The court noted that “[t]he disclosure theories about McMullen and

Wadman would likely have some merit if the petitioners had done more to articulate

them, support them with case law, and explain their relationship to a determination

of fair value.”119      Despite the cursory nature of the allegations, the court

114
Id.
115
Id.
116
Id. at *41.
117
 Id. at *42 (quoting Dell, 177 A.3d at 33).
118
Id.
119
Id. at *43.
                                             24
acknowledged that “the proxy statement should have disclosed McMullen’s interest

in retiring, his roles with GT Gold and New Chris, and their implications for his

employment agreement. Stockholders also should have been told that Wadman

resigned because of disputes with senior management about the conduct of the sale

process.”120 But, the court was not convinced that Petitioners’ arguments were

“sufficient to undermine the stockholder vote as an expression of the preference of

a supermajority of Stillwater’s stockholders for a sale rather than having the

Company continue as a standalone entity.”121 Although the disclosures might have

“affected stockholders’ views about whether their negotiators had extracted the

highest possible bid,” there would not have been “any reason to revise their

assessment of the Company’s prospects as a standalone entity or to vote down the

Merger in the belief that the Company was more valuable as a going concern in its

operative reality as a widely held, publicly traded firm.”122 Nonetheless, the court

did “not give heavy weight to the stockholder vote” because of the disclosure

issues.123

          As with the pre-signing arguments, after analyzing and addressing all of

Petitioners’ post-signing process challenges, the court concluded that “Sibanye

120
Id.
121
Id.
122
 Id.
123
Id.
                                          25
proved by a preponderance of the evidence that the sale process made the deal price

a persuasive indicator of fair value. The sale process was not perfect, and the

petitioners highlighted its flaws, but the facts of this case, when viewed as a whole,

compare favorably” with this Court’s precedents.124 On review, given the record

before the Court of Chancery, we hold that the court did not abuse its discretion in

so holding.

            4. The Court of Chancery properly based its deal price analysis on
               the sale process, not on its single-bidder hypothetical

         Petitioners do not meaningfully challenge any of the Court of Chancery’s

specific holdings regarding the objective indicia of reliability.       Nor do they

meaningfully dispute the court’s treatment of any of the specific arguments

concerning the pre- and post-signing phases. Instead, Petitioners assert that “[t]he

court below failed to analyze the sale[] process” because it “analyzed a hypothetical

‘single-bidder’ process.”125

         When addressing Petitioners’ arguments concerning the lack of outreach to

other buyers during the pre-signing phase, the Court of Chancery entertained the

question of whether “the deal price [would] provide persuasive evidence of fair value

if Stillwater had pursued a single-bidder strategy in which it only interacted with

124
Id. at *44.
125
      Opening Br. 37.
                                         26
Sibanye before signing the Merger Agreement . . . .”126 The court stated that it

believed that “if the proponent of a single-bidder process could show that the merger

agreement allowed for a passive post-signing market check in line with what

decisions have held is sufficient to satisfy enhanced scrutiny, and if there were no

other factors that undermined the sale process, then the deal price would provide

persuasive evidence of fair value.”127

       But, contrary to Petitioners’ allegations, the court did not ignore the facts

pertinent to the actual process. As this Court described above, the Court of Chancery

reviewed each step of the sale process before concluding that the deal price was

reliable. The entirety of the court’s single-bidder discussion encompasses a small

portion of its lengthy analysis. Moreover, the court recognized that its analysis was

hypothetical and emphasized that it “already found that the sale process exhibited

objective indicia of reliability” without relying on the hypothetical.128 As a result,

that portion of the court’s analysis was not necessary to its decision, does not alter

its holding in this case, and is not being considered on appeal.

126
    Stillwater Mining, 2019 WL 3943851, at *24.
127
Id. at *30.
128
Id. The court also clarified “I am not suggesting that the Delaware Supreme Court has
ever endorsed a single-bidder process for purposes of appraisal, nor that any of the
precedents that this decision has discussed are squarely on point. Nor am I claiming to
have any privileged insight into how the Delaware Supreme Court would or should
evaluate the persuasiveness of a single-bidder strategy on the facts of any particular case.”
Id.
                                             27
       “What is necessary in any particular case . . . is for the Court of Chancery to

explain its [analysis] in a manner that is grounded in the record before it.”129 Here,

the Court of Chancery thoroughly analyzed the facts surrounding Stillwater’s sale

process in accordance with this Court’s precedent. Absent any sign that the court

abused its statutory mandate, this Court will not second-guess the court’s careful

examination of Stillwater’s sale process. Therefore, we hold that the Court of

Chancery did not abuse its discretion when it held that the deal price was a reliable

indicator of Stillwater’s fair value.

      B. The Court of Chancery Did Not Abuse its Discretion when it Declined
         to Grant a Deal Price Adjustment

      Next, Petitioners argue that the Court of Chancery abused its discretion when

it declined to adjust the deal price upward to reflect the rising commodity prices

between signing and closing. They argue that “[t]he trial court, while recognizing

the undisputed increase in Stillwater’s value between signing and closing, refused to

award such accretion . . . .”130 Moreover, according to Petitioners, the court wholly

based its decision to not adjust the deal price on its erroneous conclusion that

“Petitioners had not argued for such an adjustment.”131

129
    DFC, 172 A.3d at 388.
130
    Opening Br. 24.
131
Id.
                                         28
       “In a statutory appraisal proceeding, both sides have the burden of proving

their respective valuation positions . . . .”132 Therefore, in an appraisal proceeding,

the party seeking an adjustment to the deal price reflecting a valuation change

between signing and closing bears the burden to identify that change and prove the

amount to be adjusted.133 The time for determining the value of a dissenter’s shares

is the date on which the merger closes.134 Thus, if the value of the corporation

changes between the signing of the merger agreement and the closing, then the fair

value determination must be measured by the “operative reality” of the corporation

at the time of the merger.135

       A holistic review of the court’s analysis suggests that it was unconvinced by

Petitioners’ conclusory arguments for an adjustment to the deal price and declined

to grant the adjustment because Petitioners failed to meet their burden of proof.136

While Petitioners seize on the court’s language that “the petitioners never argued for

an adjustment to the deal price,”137 this reading ignores the court’s analysis of

numerous difficult considerations that Petitioners failed to adequately address. The

132
    M.G. Bancorp., Inc. v. Le Beau, 737 A.2d 513, 520 (Del. 1999).
133
    See In re Appraisal of Columbia Pipeline Gp., 2019 WL 3778370, at *45 (Del. Ch. Aug.
12, 2019) (“The petitioners contend that Columbia’s value increased during this period. As
the party arguing for an upward adjustment to the deal price, the petitioners bore the burden
of proof on this issue.”).
134
    Cede & Co. v. Technicolor, Inc., 684 A.2d 289, 298 (Del. 1996).
135
Id.
136
    Stillwater Mining, 2019 WL 3943851, at *48.
137
Id.
                                             29
court’s statement that petitioners did not argue for an adjustment to the deal price

may have been inartful, but it appears that the court also considered and rejected the

notion of a deal price adjustment based on gaps in Petitioners’ arguments.

      IV.    CONCLUSION

      Based on the foregoing, the Court of Chancery’s August 21, 2019

Memorandum Opinion and September 27, 2019 Post-Trial Judgment order are

AFFIRMED.

                                         30