16 Dec 2016 Cases

Compass Lexecon Client Fidelity National Financial Prevails in Delaware Stockholder Appraisal Action

2 minute read


Compass Lexecon President Daniel R. Fischel Testifies Successfully at Trial

This case involved a stockholder appraisal action resulting from Fidelity National Financial's $4.2 billion acquisition of Lender Processing Services ("LPS") in 2014. LPS shareholders who voted in favor of the merger received $37.14 per share, the final merger consideration. A large shareholder demanded appraisal, however, and claimed that the merger consideration was inadequate. A four day trial was held in May 2016 in the Delaware Court of Chancery before Vice Chancellor J. Travis Laster.

At trial, petitioners and their expert claimed that the merger price was unreliable and the fair value of LPS was actually $50.46 per share. Compass Lexecon President Professor Daniel R. Fischel, by contrast, testified that the "maximum fair value" of LPS was the final merger consideration of $37.14 per share. Professor Fischel's conclusion was based on the contemporaneous market evidence, including, among other things, the actions of, and preliminary indications of interest by, potential acquirors, the use of a competitive sales process with both a pre- and post-signing market check, and the premium to LPS' unaffected stock price implied by both the initial merger consideration and the final merger consideration. As a check and further support for his conclusion, Professor Fischel also performed and testified about a discounted cash flow valuation analysis.

In his 74 page opinion issued on December 16, 2016, Vice Chancellor Laster agreed with Professor Fischel and respondent's conclusion that the maximum fair value of LPS was the final merger consideration and wrote, "Taken as a whole, the evidence at trial established that the Final Merger Consideration was a reliable indicator of fair value as of the closing of the Merger and that, because of synergies and a post-signing decline in the Company's performance, the fair value of the Company as of the closing date did not exceed the Final Merger Consideration." Vice Chancellor Laster also largely agreed with the conclusions in Professor Fischel's discounted cash flow analysis.

As a result, Vice Chancellor Laster applied 100% weight to the transaction price, thereby adopting the $37.14 per share final merger consideration as the fair value of LPS and rejected petitioners' claim for $50.46 per share.

Professor Fischel was supported by a team at Compass Lexecon that included Rajiv Gokhale, Tim McAnally, Edward Crane, and Cheryl Leong. We worked with John A. Neuwirth, Evert J. Christensen Jr., Matthew S. Connors, and Elizabeth Kerwin-Miller of Weil, Gotshal & Manges LLP and Bradley R. Aronstam and S. Michael Sirkin of Ross Aronstam & Moritz LLP, who successfully represented Fidelity National Financial.

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