## Facts

- Santa Fe Industries, Inc. owned about 95% of Kirby Lumber Corporation and sought to eliminate the remaining minority interest.
- In July 1974, Santa Fe completed a parent–subsidiary short-form merger under 8 Del. C. § 253, cashing out minority shareholders.
- Dissenting holders of roughly 5,000 shares timely pursued appraisal under 8 Del. C. § 262; the Court of Chancery appointed an appraiser.
- The appraiser determined “fair value” at $254.40 per share using a blended approach: earnings value of $120 per share and asset value of $456 per share, weighted 60% to earnings and 40% to assets.
- Minority stockholders objected that the valuation and methodology failed to reflect the value that would be reached in a hypothetical arm’s-length negotiation, particularly given timber asset appreciation.
- The corporation objected that earnings should dominate valuation and that asset weighting overstated value.
- The Court of Chancery rejected both sides’ exceptions and confirmed the appraiser’s valuation.
- A minority stockholder (Folweiler) submitted a letter objecting to the merger and discussing value, but the Court of Chancery held it did not clearly demand appraisal as required by § 262.

## Issues

1. In a § 262 appraisal after a parent–subsidiary short-form merger, must “fair value” be determined using a hypothetical arm’s-length negotiation standard associated with “entire fairness” review?
2. Did the Court of Chancery err in confirming the appraiser’s blended valuation methodology and the 60/40 weighting of earnings and asset values?
3. Does a letter expressing dissatisfaction with the merger and discussing value, without a clear request for appraisal, satisfy § 262’s written-demand requirement?

## Decision

- The Delaware Supreme Court affirmed the Court of Chancery in all respects.
- The Court declined to modify traditional appraisal methodology to incorporate “entire fairness” concepts or an arm’s-length negotiation construct.
- The Court upheld the appraiser’s use of combined valuation measures and the 60/40 weighting as supported by the record and within permissible discretion.
- The Court affirmed that Folweiler’s letter did not constitute a valid statutory demand for appraisal.

## Legal Principles

- Appraisal under 8 Del. C. § 262 is a limited, statutory remedy to award dissenting stockholders the judicially determined “fair value” of their shares as of the merger date.
- “Fair value” in appraisal focuses on the corporation’s value as a going concern and does not automatically include a control premium, speculative buyer-specific synergies, or the most favorable negotiated price.
- Delaware appraisal permits the trier of fact to use a blended approach (e.g., earnings and net asset value) and to assign weights based on the company’s characteristics; appellate review is deferential absent clear error.
- Fiduciary “entire fairness” review and appraisal are distinct; alleged unfair dealing or broader fairness concerns are not imported into § 262 valuation as a substitute for separate fiduciary-duty claims.
- Because appraisal rights are purely statutory, stockholders must strictly comply with § 262 procedures; a demand must clearly and affirmatively request appraisal in writing.

## Conclusion

The Delaware Supreme Court sustained a conservative appraisal framework by affirming a blended earnings-and-asset valuation for a short-form freeze-out merger and by enforcing strict compliance with § 262’s written demand requirement for invoking appraisal rights.


Bell v. Kirby Lumber Corp., 413 A.2d 137 (Del. 1980)