## Facts

- MacAndrews & Forbes Group, Inc. (MAF), controlled by Ronald Perelman, sought to acquire Technicolor, Inc. in the early 1980s.
- MAF completed a public cash tender offer at $23 per share in late 1982, acquiring all but 17.81% of Technicolor’s shares.
- On January 24, 1983, MAF completed a cash-out merger converting the remaining shares into the right to receive $23 per share.
- Cinerama, Inc., beneficial owner of 201,200 shares held of record by Cede & Co., dissented and sought a statutory appraisal under 8 Del. C. § 262.
- The appraisal proceeding was litigated over many years and returned to the Court of Chancery on multiple remands; on the latest remand, the court was directed to conduct a full de novo appraisal of Technicolor’s going-concern value as of the merger date, considering implementation of the “Perelman plan,” while excluding value arising solely from the merger.
- After a second appraisal trial in 2003, the court determined fair value per share and fixed prejudgment and postjudgment interest.

## Issues

1. What was the fair value of Technicolor’s shares as of the January 24, 1983 merger date, valuing the company as a going concern and excluding value arising from the merger itself under 8 Del. C. § 262?
2. How should the court evaluate competing expert valuations and select among valuation methodologies and inputs (including DCF assumptions)?
3. What prejudgment and postjudgment interest should be awarded on the appraisal amount?

## Decision

- The Court of Chancery determined the fair value of Technicolor’s common stock at the merger date to be $21.98 per share.
- The court awarded Cinerama $4,422,376 in principal (201,200 shares × $21.98).
- The court awarded prejudgment interest at 10.32% per year, compounded, from January 24, 1983 to August 2, 1991.
- The court awarded postjudgment interest at 7.0% (the statutory legal rate), as simple interest on principal only, from August 3, 1991 until payment.

## Legal Principles

- A Delaware appraisal under 8 Del. C. § 262 determines the dissenter’s proportionate interest in the corporation’s fair value as a going concern as of the merger date.
- Fair value must exclude any element of value arising from the accomplishment or expectation of the merger; appraisal is not a damages remedy for merger-related wrongdoing.
- Post-transaction business initiatives may be considered only to the extent they reflect the company’s operative reality at the merger date and were reasonably foreseeable and more likely than not to occur, rather than value created solely by the merger.
- The court is not required to accept any expert’s valuation in full and may construct its own valuation by adopting reliable components, adjusting assumptions, and rejecting projections inconsistent with contemporaneous expectations and performance.
- Merger price may be considered as evidence of value but is not dispositive of statutory fair value.
- Interest in appraisal serves to compensate for the time value of money; the court has discretion to set reasonable prejudgment interest and to determine the form of postjudgment interest consistent with Delaware practice.

## Conclusion

The court conducted a de novo statutory appraisal of Technicolor as of the 1983 cash-out merger, considered foreseeable elements of the Perelman plan without including merger-created value, set fair value at $21.98 per share, and awarded compounded prejudgment interest and simple postjudgment interest on principal.


Cede & Co. v. Technicolor, Inc., No. 7129, 2003 WL 23700218 (Del. Ch. Dec. 31, 2003)