VERITION PARTNERS MASTER FUND LTD. and Verition Multi-Strategy Master Fund Ltd., Petitioners Below, Appellants,
ARUBA NETWORKS, INC., Respondent Below, Appellee.
March 27, 2019
Below: Court of Chancery of the State of Delaware, C.A. No.
appeal from the Court of Chancery. REVERSED and REMANDED.
J. Barry, Esquire, Christine M. Mackintosh, Esquire (Argued
), Michael T. Manuel, Esquire, Rebecca A. Musarra, Esquire,
GRANT & EISENHOFER P.A., Wilmington, Delaware, for
Appellants, Verition Partners Master Fund Ltd. and Verition
Multi-Strategy Master Fund Ltd.
P. Kelly, Esquire (Argued ), Steven P. Wood, Esquire, Daniel
J. Brown, Esquire, MCCARTER & ENGLISH, LLP, Wilmington,
Delaware; Marc J. Sonnenfeld, Esquire, Karen Pieslak
Pohlmann, Esquire, Laura Hughes McNally, Esquire, MORGAN,
LEWIS & BOCKIUS LLP, Philadelphia, Pennsylvania, for
Appellee, Aruba Networks, Inc.
Weinberger, Esquire, Derrick Farrell, Esquire, Thomas Curry,
Esquire, LABATON SUCHAROW LLP, Wilmington, Delaware, for
Amici Curiae Professors Audra Boone, Brian Broughman, Albert
Choi, Jesse Fried, Mira Ganor, Antonio Macias, and Noah
Stoffman in Support of Appellant and Reversal.
P. Williams, Esquire, RICHARDS, LAYTON & FINGER, P.A.,
Wilmington, Delaware, for Professors William J. Carney and
Keith Sharfman as Amici Curiae in Support of Appellee and
STRINE, Chief Justice; VALIHURA, VAUGHN, SEITZ, and TRAYNOR,
Justices; constituting the Court en Banc.
statutory appraisal case, the Court of Chancery found that
the fair value of Aruba Networks, Inc., as defined by 8 Del.
C. § 262, was $ 17.13 per share, which was the thirty-day
average market price at which its shares traded before the
media reported news of the transaction that gave rise to the
appellants appraisal rights. In its post-trial
opinion, the Court of Chancery engaged in a wide-ranging
discussion of its view on the evolution of our States
appraisal law and how certain recent decisions have affected
the relevance of market-based evidence to determining fair
value. For purposes of this
appeal, we need not respond in full to the dicta and instead
focus on the key issue before us: whether the Court of
Chancery abused its discretion, based on this record, in
arriving at Arubas thirty-day average unaffected market
price as the fair value of the appellants shares. Because
the Court of Chancerys decision to use Arubas stock price
instead of the deal price minus synergies was rooted in an
erroneous factual finding that lacked record support, we
answer that in the positive and reverse the Court of
Chancerys judgment. On remand, the Court of Chancery shall
enter a final judgment for the petitioners awarding them $
19.10 per share, which reflects the deal price minus the
portion of synergies left with the seller as estimated by the
respondent in this case, Aruba.
August 2014, Hewlett-Packard Company ("HP"), a
publicly traded company, approached Aruba, another publicly
traded company, about a potential combination. Aruba hired
professionals and, in addition to negotiating with HP, began
to shop the deal. Five other logical strategic bidders were
approached, but none of them showed any
interest. The petitioners did not argue below
that private equity bidders could compete given the synergies
a combination with HP or another strategic buyer could
several months of negotiations between the two companies, the
Aruba board decided to accept HPs offer of $ 24.67 per
share. News of the deal leaked to the press about two weeks
later, causing Arubas stock price to jump from $ 18.37 to $
22.24. The next day, after the market closed, Aruba released
its quarterly results, which beat analyst expectations.
Arubas stock price rose by 9.7% the following day on the
strength of its earnings to close at $ 24.81 per share, just
above the deal price.
long after the deal leaked, both companies boards approved
the transaction, and Aruba and HP formally announced the
merger at a price of $ 24.67 per share. The final merger
agreement allowed for another passive market