Cede & Co. v. Technicolor, Inc.

684 A.2d 289 (1996)

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Nature of the Case

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Facts

With the approval of a majority of Technicolor shareholders, MAF merged its wholly owned sub-Macanfor into Technicolor. The only defendant in this action is Technicolor (D), the surviving corporation of the merger. P is the beneficial owner of 201,200 shares of Technicolor common stock and P1 is the record owner of that stock. P1 contends that the Chancery Court erred as a matter of law in appraising the fair value of its Technicolor shares at $21.60 per share. P claims that the court refused to consider the valuations of MAF's new business plans and strategies for D which the court had found that they were not speculative, but had been developed, adopted and implemented between the date of the merger agreement and the merger. The Court had concluded that after MAF had gained control of D, the new management began to dismember what they saw as a badly conceived business strategy. MAF basically decided to sell off several of D's divisions. Realization of $54 million was expected from such sales. The merger was accomplished on January 24, 1983, and the parties agreed that the appraisal value of D must be fixed at that date. However, a fundamental disagreement arose concerning the nature of the enterprise to be appraised. P contends that the Court should have valued D on the date of its merger. D argues that the Court properly appraised D without consideration of the new plans that were being implemented just shortly before the merger. The Court disagreed with P; as a matter of public policy, that the valuation process in a statutory appraisal proceeding should be the same irrespective of whether a merger is accomplished in one or two steps. Thus, future value that would not exist but for the merger, even if it is capable of being proven on the date of the merger, is irrelevant in a Delaware statutory appraisal proceeding. Thus, the Court excluded any valuations of the sale of assets of D. P appealed.