Francis I. Dupont & Co. v. Universal City Studios, Inc.
Delaware Court of Chancery
312 A.2d 344 (1973)

- Written by Douglas Halasz, JD
Facts
Universal City Studios, Inc. (UCS) (defendant) absorbed Universal Pictures Co. (Universal) in a short-form merger. Universal’s minority stockholders (stockholders) (plaintiffs) were offered $75 per share, which they rejected and then perfected their appraisal rights. The appraiser calculated the stock value as $91.47 per share, comprised of $92.89 earnings value weighted at 80 percent, plus $85.82 asset value weighted at 20 percent. The appraiser determined the earnings value using Universal’s mean earnings per share for the five years preceding the merger and a 16.1 multiplier, representing the average price earnings ratio of nine motion picture companies, to capitalize Universal’s earnings. Both the stockholders and UCS disagreed with the appraiser’s valuation and filed exceptions. The stockholders calculated the true value as $131.89 per share, comprised of $129.12 earnings value weighted at 70 percent, plus $144.36 market value weighted at 20 percent, plus $126.46 asset value weighted at 10 percent. UCS calculated the true value as $52.36 per share, comprised of $51.93 earnings value weighted at 70 percent, plus $41.66 dividends value weighted at 20 percent, plus $76.77 asset value weighted at 10 percent. Generally, UCS contended that Universal was a weak and undiversified corporation at the time of the merger in a declining theatrical movie industry. Conversely, the stockholders contended that Universal was well-situated considering the recovering theatrical market and the new and robust television market emerging at the time of the merger. The Delaware Court of Chancery heard argument.
Rule of Law
Issue
Holding and Reasoning (Duffy, J,)
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