Delaware Supreme Court Holds That Chancery Court Is Not Bound By Merger Price Or Fairness Opinion In Appraisal Proceedings Under Delaware General Corporate Law Section 262(h)


In Golden Telecom, Inc. v. Global GT LP, 2010 WL 5387589 (Del. Dec. 29, 2010), the Delaware Supreme Court affirmed a judgment of the Delaware Chancery Court in an appraisal proceeding under Section 262(h) of the Delaware General Corporation Law ("DGCL"). Section 262(h) provides that in the event of a merger, a stockholder of a Delaware corporation is entitled to an independent appraisal proceeding regarding the "fair value" of its outstanding shares. In affirming the Chancery Court, the Supreme Court declined to adopt two bright line rules for appraisal proceedings under Section 262(h). First, it rejected the notion that the Chancery Court must consider the merger price agreed to by the parties following arm‘s-length negotiations and fair process as necessarily reflecting the "fair value" of the corporation‘s shares. Second, it rejected the assertion that a corporation is bound by company-specific data included in its fairness opinion in arriving at a "fair value" under Section 262(h). This decision confirms that the Chancery Court has great flexibility, and is entitled to great deference, in conducting its independent appraisal of the value of a merger target under Section 262(h).

In early 2007, petitioner Golden Telecom, Inc. ("Golden") received an offer from VimpelCom to acquire Golden. VimpelCom‘s two largest stockholders –– Altimo and Telenor — also were the largest stockholders in Golden. Shortly thereafter, Golden formed a special committee of independent directors, unaffiliated with Altimo or Telenor, to assess potential strategic transactions. In September 2007, VimpelCom proposed a tender offer to Golden at $80 per share.

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