Vice Chancellor Laster’s maiden valuation opinion, Reis v. Hazelett Strip-Casting Corp., provides important guidance for litigating price claims in Delaware. Among other things, the Court (i) adopted a broad rationale for applying enhanced scrutiny to mergers; (ii) held that "fair value," as applied to reverse stock splits under DGCL 155, has the same meaning as fair price/fair value in entire fairness and appraisal cases; (iii) applied a bifurcated analysis to the fair price prong of entire fairness, first determining if deal price is within a fair range, and then fixing a point-value for damages only if price and process are not entirely fair; (iv) held that "normalizing adjustments” to earnings are proper to account for expenses reflecting controlling shareholder self-dealing; and (v) held that book value is an appropriate measure of value for businesses that rely heavily on physical assets, but tends to undervalue a business as a going concern.
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Securities Law Updates
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