In re Spang Industries, Inc.

In January 1983, Spang Industries, Inc. (Industries) (defendant) was merged with and into Jethro Acquisition Inc., which was subsequently merged with and into Spang & Co. Industries gave shareholders who had objected to the merger (collectively, the dissenting shareholders) (plaintiffs) written notice that the merger had become effective on January 31, 1981, and offered to pay the dissenting shareholders $20 per share for the dissenting shareholders’ shares of Industries stock. The dissenting shareholders rejected the offer and demanded payment of the shares’ fair value. A Pennsylvania trial court adjudicated the dissenting shareholders’ demand. At trial, testimony from three experts indicated that the shares’ net asset value was the most reliable method of determining fair value, in addition to assessing the shares’ market value and investment value. The net asset values calculated by the experts included an allowance for intangibles, even though no evidence was presented to establish the intangibles’ value. Additionally, one of the experts used a different method for calculating net asset value, which resulted in a net asset value significantly higher than the other experts’ calculations. The trial court ultimately concluded that as of January 31, 1983, the fair value of the Industries shares was $32.76 per share. To reach that value, the trial court took (1) the shares’ market value, (2) the shares’ investment value, and (3) the average of the net asset values calculated by the three experts. The court then assigned each type of value a weight in the shares’ total fair value, weighing market value at 10 percent, investment value at 10 percent, and net asset value at 80 percent. The court thus multiplied the three values by .10, .10, and .80, respectively, and added the three totals to reach the share valuation. Industries appealed.