Chancery Court Relies on Compass Lexecon Senior Consultant Bradford Cornell’s Testimony
This case involved a combined breach of fiduciary duty claim and appraisal action resulting from Sprint Corporation’s $3.6 billion acquisition of Clearwire Corporation in July 2013. Clearwire shareholders who voted in favor of the acquisition received $5.00 per share. A large shareholder claimed the acquisition resulted from breaches of fiduciary duty by Sprint, aided and abetted by SoftBank, a Japanese telecommunications company that invested $21.6 billion in Sprint the day after the Sprint-Clearwire acquisition closed. The shareholder also filed an appraisal action and claimed that the merger consideration was inadequate. The breaches of fiduciary duty claim and appraisal action were combined, and a ten day trial was held in October and November 2016 in the Delaware Court of Chancery before Vice Chancellor J. Travis Laster.
At trial, plaintiffs and their experts claimed that the fair value of Clearwire was actually $16.08 per share. Compass Lexecon Senior Consultant Professor Bradford Cornell, by contrast, testified that the standalone fair value of Clearwire was $2.13 per share. Professor Cornell’s conclusion was based on a discounted cash flow valuation.
In his 95 page opinion issued on July 21, 2017, Vice Chancellor Laster ruled that the Sprint-Clearwire merger was entirely fair, found in Sprint’s favor on the claim for breach of fiduciary duty, and found in SoftBank’s favor on the claim for aiding and abetting. Vice Chancellor Laster also agreed with Professor Cornell’s and defendant’s conclusion that the standalone fair value of Clearwire was $2.13 per share and wrote, “[t]he court adopts Cornell’s DCF valuation in full.” As a result, Vice Chancellor Laster’s conclusion resulted in a determination of fair value that was more than 50 percent below the merger consideration as a result of the considerable synergies generated by the transaction.
Professor Cornell was supported by a team at Compass Lexecon that included Kevin Dages, Jennifer Milliron, John Haut, Tim McAnally and Ed Crane. We worked with Robert S. Saunders, Jennifer C. Voss, Ronald N. Brown, III and Arthur R. Bookout of Skadden, Arps, Slate, Meagher & Flom LLP and Erik J. Olson, James P. Bennett, James E. Hough and James J. Beha II of Morrison & Foerster LLP.