240 A.3d 3
Del.2020Background:
- Stillwater Mining, a Delaware public company that mines palladium, entered a reverse-triangular merger with Sibanye Gold that closed May 4, 2017; merger consideration was $18 per share.
- CEO Michael McMullen began negotiations with Sibanye before full board involvement; the board later retained BAML and conducted a limited market check; several potential buyers were contacted but only Sibanye bid.
- Sibanye increased its offers and delivered due diligence access; Stillwater’s board twice rejected lower offers and ultimately approved Sibanye’s $18 offer with a BAML fairness opinion; stockholders approved the deal.
- Palladium prices (and Stillwater’s trading price) rose between signing and closing; a group of dissenting stockholders sought statutory appraisal under 8 Del. C. § 262.
- The Court of Chancery held the $18 deal price was the most persuasive indicator of fair value and denied petitioners’ request to adjust that price upward for post-signing palladium-driven value increases.
- The Delaware Supreme Court affirmed, finding no abuse of discretion in deferring to the deal price or in declining an upward adjustment.
Issues:
| Issue | Petitioners' Argument | Sibanye's Argument | Held |
|---|---|---|---|
| Whether the Court of Chancery erred in treating the $18 deal price as the best evidence of fair value given alleged flaws in the sale process | The sale process was flawed (CEO-led outreach, limited pre-signing market check, inadequate disclosures) and thus the deal price is unreliable | The court properly analyzed the process, found objective indicia of reliability (arm’s-length sale, buyer due diligence, premium over market, post-signing market check), and the deal price is persuasive | Affirmed: Court of Chancery did not abuse its discretion in deferring to the deal price as the most persuasive indicator of fair value |
| Whether the court should have adjusted the deal price upward to reflect increase in palladium prices between signing and closing | Petitioners argued that rising palladium prices increased Stillwater’s value and the deal price should be adjusted upward to reflect closing-date fair value | Sibanye argued petitioners bore the burden to prove both that value rose and the amount of any adjustment; they failed to meet that burden | Affirmed: Court did not abuse its discretion in denying an upward adjustment because petitioners failed to prove and quantify the change required |
Key Cases Cited
- DFC Global Corp. v. Muirfield Value P’rs, 172 A.3d 346 (Del. 2017) (robust market checks and arm’s-length sales support deference to deal price)
- Dell, Inc. v. Magnetar Glob. Event Driven Master Fund Ltd., 177 A.3d 1 (Del. 2017) (deal price merits heavy weight when sale process shows market efficiency and fair play)
- Verition Partners Master Fund Ltd. v. Aruba Networks, Inc., 210 A.3d 128 (Del. 2019) (buyer access to nonpublic information and due diligence supports giving deal price considerable weight)
- M.G. Bancorp., Inc. v. Le Beau, 737 A.2d 513 (Del. 1999) (trial court may adopt party valuation model or fashion its own in appraisal proceedings)
- Cede & Co. v. Technicolor, Inc., 684 A.2d 289 (Del. 1996) (fair value must be determined as of the merger closing date and excludes merger-related synergies)