Fir Tree Value Master Fund, Lp v. Jarden Corp.

236 A.3d 313 (2020)

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Nature of the Case

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Facts

D operated as a decentralized holding company with a large portfolio of consumer product brands in separate operating companies. Franklin served as CEO and board chairman until 2011 when he stepped away from day-to-day operations but remained in charge of capital distribution and M&A activity. D's stock traded in a semi-strong efficient market. Newell operated as a large consumer products company with a vast portfolio of products with household names. Newell owned several portfolio businesses that functioned essentially as independent companies. Newell sought to streamline its business structure and decrease costs by delayering the business. Eventually, the two parties got together. Newell was interested in acquiring D. At the time of the first informal meeting D's stock was trading in the high $40s. D's board supported and encouraged further discussions. D was clearly interested in selling for $60 or more per share. D closed the Jostens acquisition and the market reacted negatively. D's stock dropped about 12% over the following two weeks, and analysts reduced their price targets. D repurchased stock over two days, averaging $45.96 per share on the first, and $48.05 per share on the second. The board directed that negotiations continue with Newell. Newell structured the deal based on $500 million in estimated annual cost synergies, which priced Jarden at $57-$61 per share. Newell offered $57 per share, with $20 in cash plus a fixed exchange ratio of Newell shares. The was an 18% premium over D's then-current share price. D's board rejected the offer and authorized Franklin to seek a higher offer, but not to make a counteroffer. Franklin made a counteroffer of $63 per share with $21 in cash. Newell balked, the meeting ended, and the deal almost died. Newell came back with an offer of $21 in cash and a target price of $60 per share. D's board accepted the offer. News of the deal leaked (how surprising) on December 7, but not who was buying whom or the deal price. Newell's stock price increased, D's stock price decreased, and they renegotiated the stock-for-stock ratio. D negotiated the corporation's sale to Newell Brands for $59.21 per share in cash and stock. The parties announced the merger on December 14, 2015. D's stock price jumped, and it eventually converged on the deal price by the time of closing. Newell's stock price declined by nearly 7%. Several large Jarden stockholders (Ps) refused to accept the sale price and petitioned for appraisal in the Court of Chancery. The Court of Chancery found that, of all the valuation methods presented by the parties' experts, only the $48.31 unaffected market price of D stock could be used reliably to determine the fair value. The court placed little or no weight on other valuation metrics because the CEO dominated the sales process, there were no comparable companies to assess, and the parties' experts presented such wildly divergent discounted cash flow models that, in the end, the models were unhelpful to the court. Ps appealed.