Kevin Brady, a highly respected Delaware litigator, provides us the following review of the case.
On May 29, 2009, in response to petitioners’ motion for reconsideration of the Court’s April 16, 2009 Opinion, Chancellor Chandler in a compact six-page opinion, modified his prior decision to conclude that the fair value of the preferred shares on the date of the merger was $47.47 for each preferred share instead of the $38.92 per share he originally found.
On April 16, 2009, in a post-trial decision in a consolidated appraisal proceeding, Chancellor Chandler addressed the issue of appraisal of preferred shareholder’s stock and the “primacy of contract” as a measure of fair value. The Chancellor found that the fair value of Metromedia International Group, Inc.’s (“MIG”) preferred shares on the merger date was $38.92 for each share. The petitioners had sought a valuation in a range from $67.50 to $79.76 per share while MIG claimed that the highest value should have been $18.07 per share.
In the motion for reconsideration, the Court again went through a complicated analysis of the various sections of the certificate of designation trying to determine which Section would be applicable in fixing the fair value of the preferred shares (the details of the Court’s analysis are too voluminous to be summarized here). The question came down to whether the preferred holders could receive the $29.40 accumulated and accrued dividends in addition to the $18.07 per share conversion price. MIG argued that if a preferred holder exercised its option to convert and also received the accumulated and accrued dividend payment of $29.40, it had “double-dipped” in the payment of the unpaid dividends. The Court, while not disputing MIG’s interpretation, noted that was the deal MIG struck:
[M]y role in this case is to interpret the contract, not rewrite it to yield a result MIG thinks more to its liking. If MIG drafted a contract that allowed for slight doubledipping, then that is the deal it struck. I will not second guess the plain meaning of the contract simply because one party complains it yields a slightly more favorable result for stockholders. My conclusion is further strengthened by the fact that the party complaining about the double-dipping is the party that wrote the language in dispute.
The Chancellor determined that the value for each of MIG’s preferred shares was $47.47 ($29.40 + $18.07).