The Delaware Chancery Court revisited its decision in DFC Global’s appraisal case, increasing the payout from a 7% premium to nearly 9%. In June 2014, private equity firm Lone Star Fund VIII acquired the payday lending company DFC Global Corp for $1.3 billion, which valued investors’ shares at $9.50 apiece. Investors exercised their appraisal rights to have the court determine a fair value of the shares.
A trial was held in October 2015 to hear arguments, and this July, the court determined the shares were worth $10.21 each. Most recently in September, the court determined that aspects of a cash flow model that was previously rejected should be included in the ruling. After adjusting for that mistake and deciding to factor in a more aggressive growth rate, the court finally valued the shares at $10.30 apiece — 9 cents more than what was decided in July.
The DFC Global case is a good example of the power of appraisal to get investors a fair valuation of their shares and how appraisal cases generally result in a premium. And despite the potential increase in share value, investors often fail to timely exercise their appraisal rights, leaving money on the table.
Download FRT’s whitepaper “How Institutional Investors Are Letting Billions Slip Through Their Fingers in Delaware Appraisal Actions”.
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