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DFC Global Corp. v. Muirfield Value Partners, L.P.

Delaware Supreme Court
172 A.3d 346 (2017)


Facts

DFC Global Corporation (defendant) was a publicly traded payday lender. The company experienced rapid growth from its inception, but around 2007 began to experience heightened regulatory scrutiny and new restrictions on its practices. DFC hired Houlihan Lokey Capital Inc. to look for a buyer. Houlihan conducted an open process, contacting several potential buyers. Houlihan provided all those interested in bidding with certain non-public information, in addition to the information about DFC that was already public. Ultimately, a private equity firm bought DFC for $9.50 per share. DFC stockholders (plaintiffs) brought suit seeking a judicial appraisal of the value of their shares. The Chancery Court of Delaware determined the fair value of the shares by giving one-third weight each to the deal price, a valuation based on a discounted cashflow model, and a valuation based on comparable companies. The court did not fully explain the foundation for this allocation of weight, although it did give less weight to the deal price than it ordinarily might have, on account of the increasing regulatory scrutiny of DFC’s business, and because the sale price reflected the buyer’s specific rate-of-return requirements. Both parties appealed. DFC argued that the deal price should presumptively constitute fair value.

Rule of Law

Issue

Holding and Reasoning (Strine, C.J.)

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