Le Beau v. M.G. Bancorporation, Inc.
Delaware Court of Chancery
1998 WL 44993 (1998)
- Written by Sean Carroll, JD
Facts
Southwest Bancorp, Inc. (Southwest) (defendant) owned over 91 percent of the outstanding common stock of M.G. Bancorporation, Inc. (MGB) (defendant), a corporation with a controlling interest in two subsidiaries. MGB merged into Southwest through a short-form merger, which did not require MGB shareholder approval. MGB’s minority shareholders were offered $41 per share. Southwest’s appraiser made the $41-per-share valuation by applying a minority discount to the shares. A group of minority shareholders (the plaintiff shareholders) (plaintiffs) rejected the offer and sought to exercise their appraisal rights. In a separate lawsuit, the Delaware Court of Chancery found that Southwest’s appraiser had breached his fiduciary duty to the minority shareholders by improperly applying the minority discount to their shares. In the appraisal proceeding, the plaintiff shareholders presented evidence that their shares were worth $85 per share. They relied on a valuation by David Clarke, who used a combination of the comparative-publicly-traded approach, the discounted-cash-flow method, and the comparative-acquisitions approach. Under Clarke’s comparative-acquisitions approach, Clarke analyzed the stock price of similar companies that had recently been sold. Clarke did not use a control premium in this method because the stock price of those other companies already accounted for the parent’s controlling interest in their value. Southwest relied on Robert Reilly, who presented evidence that the shares were worth approximately $42 per share using a combination of the discounted-cash-flow method and a capital-markets analysis.
Rule of Law
Issue
Holding and Reasoning (Jacobs, J.)
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