Delaware Chancery Court Confirms Stockholders May Petition for Appraisal without Showing Shares Were Not Voted in Favor of Merger by Previous Stockholders
In a pair of memorandum opinions written by Vice Chancellor Glasscock and decided on January 5, 2015, the Court of Chancery of the State of Delaware, in In Re Appraisal of Ancestry.com, Inc. and Merion Capital LP v. BMC Software, Inc., found that neither the beneficial owner nor the record owner of shares for which appraisal is sought under Section 262 of the General Corporation Law of the State of Delaware is required to show that the specific shares for which it seeks appraisal have not been voted in favor of the merger in question by previous stockholders. The findings follow the analysis applied in In Re Appraisal of Transkaryotic Therapies, Inc., a 2007 case which preceded an amendment to Section 262(e) later that year permitting beneficial owners to petition for appraisal in their own name. The decisions support the practice known as “appraisal arbitrage” – a practice which has contributed to the more than tripling of incidents of appraisal petition filings in eligible deals over the past 10 years – for investors who buy stock in target companies following the record date for stockholder votes on mergers and highlight public policy considerations concerning the role of Delaware’s appraisal statute in merger transactions.