Verition Partners Master Fund Ltd. v. Aruba Networks, Inc.

Summary

The Delaware Supreme Court reversed the Court of Chancery’s appraisal judgment valuing Aruba Networks shares at $17.13 based on the unaffected market price. The Court held that the Chancery Court abused its discretion by deducting for unspecified agency-cost reductions and directed entry of judgment at $19.10 per share, reflecting the merger deal price less the portion of synergies attributed to the seller.

Holdings

1. The Court of Chancery abused its discretion by relying exclusively on Aruba's thirty-day unaffected market price of $17.13 per share. The court's selection was based on an erroneous factual premise that the record did not support and failed to account adequately for HP's access to material nonpublic information, its acquisition-specific incentives, and the developed evidence concerning the transaction price and synergies.
2. A court applying Delaware's going-concern standard must exclude merger-specific synergies and other value arising from the accomplishment or expectation of the merger, but it may not make an additional deduction for unspecified agency-cost reductions when the record indicates that the strategic buyer's expected cost reductions were already captured in its synergy estimate.
3. The court ordered entry of final judgment for Verition at $19.10 per share, representing the deal price minus the portion of synergies left with the seller as estimated by Aruba, plus any interest to which the petitioners were entitled.

Questions Presented

1. Whether the Court of Chancery abused its discretion by using Aruba's thirty-day unaffected market price as the exclusive measure of fair value in the appraisal proceeding.
2. Whether the Court of Chancery improperly deducted unspecified agency-cost reductions in addition to merger synergies when applying the going-concern standard.
3. Whether the record supported entry of judgment at Aruba's deal price minus the synergies retained by the buyer, rather than requiring further valuation proceedings.

Disposition

reversed_and_remanded