Kleinwort Benson, Ltd. v. Silgan Corporation

Silgan Corporation (Silgan) (defendant) merged with Silgan Holdings (SH). Kleinwort Benson, Ltd. and other minority stockholders of Silgan (dissenters) (plaintiffs), who had less control over Silgan than majority stockholders, objected to the merger and exercised the dissenters’ appraisal rights in court, suing to recover the fair value of the dissenters’ shares. At trial, the dissenters relied on the expert testimony of Louis Paone, who valued Silgan at $12.65 per share. Silgan relied on the expert testimony of James Kovacs, who valued Silgan at $4.88 per share. Both Paone and Kovacs conducted a market-value analysis. Paone’s market-value analysis examined the market prices of companies comparable to Silgan and similar mergers but included a control premium that resulted in a higher share-price valuation. Kovacs’s analysis did not look at comparable mergers and did not include a control premium or an inherent minority discount that would have accounted for the dissenters’ lack of control over the merger. Kovacs testified that a reasonable minority-discount estimate range would have been 10 to 15 percent. Paone and Kovacs also used a discounted-cash-flow (DCF) analysis. For the terminal-value portion of the DCF analysis, Kovacs revised Silgan’s cash-flow projections for a defined time period, whereas Paone did not. Instead, Paone devised a terminal value using Silgan’s cash-flow projections for the defined time period. Upon discounting Silgan’s future returns to present value, Kovacs looked at Silgan’s end-of-year cash receipts, whereas Paone looked at mid-year cash receipts. Silgan was a seasonal business and earned more cash at the end of the year. The court appointed a neutral expert to critique the experts’ opinions and proceeded to set the fair value of Silgan.