## Facts

- Dr Pepper Snapple Group, Inc. (Dr Pepper) and Keurig Green Mountain, Inc. (Keurig) announced a transaction to combine their businesses.
- The transaction was structured so Keurig would become an indirect wholly owned subsidiary of Dr Pepper through a reverse triangular merger.
- To complete the deal, Dr Pepper planned to form Salt Merger Sub, Inc. (Merger Sub), a wholly owned subsidiary.
- Merger Sub would merge with and into Maple Parent Holdings Corp. (Maple Parent), Keurig’s indirect owner, with Maple Parent surviving as an indirect wholly owned subsidiary of Dr Pepper after the merger.
- After closing, Maple Parent’s equity holders would own about 87% of Dr Pepper’s stock, and existing Dr Pepper stockholders would own about 13%.
- Dr Pepper stockholders would receive a special cash dividend of $103.75 per share and would retain their Dr Pepper shares.
- Dr Pepper stockholders were not asked to approve the Merger Sub–Maple Parent merger itself, but were asked to approve two items required to complete the transaction: (1) issuance of Dr Pepper shares as merger consideration and (2) an amendment to increase Dr Pepper’s authorized shares.
- In its preliminary proxy statement, Dr Pepper stated its stockholders would not have appraisal rights under DGCL § 262 in connection with the transaction.
- Two stockholders (City of North Miami Beach General Employees’ Retirement Plan and Maitland Police Officers and Firefighters Retirement Trust) filed a putative class action seeking a declaration that Dr Pepper stockholders were entitled to statutory appraisal rights.
- The parties filed cross-motions for summary judgment on whether appraisal rights were available under § 262.

## Issues

1. Whether DGCL § 262 grants appraisal rights to stockholders of a parent corporation (Dr Pepper) when only its subsidiary (Merger Sub) is a party to the merger.
2. Whether DGCL § 262 appraisal rights can apply when the stockholders seeking appraisal receive cash through a special dividend but retain their shares rather than exchanging or surrendering them in the merger.

## Decision

- The Court of Chancery granted summary judgment for defendants.
- The court held Dr Pepper stockholders were not entitled to appraisal rights under DGCL § 262 in connection with the proposed transaction.
- The court concluded Dr Pepper was not a “constituent corporation” in the merger; the only constituent corporations were Merger Sub and Maple Parent.
- As a separate ground, the court held § 262’s appraisal mechanism assumes the stockholder gives up the shares for which appraisal is sought, which did not occur because Dr Pepper stockholders retained their Dr Pepper shares.

## Legal Principles

- DGCL § 262 provides appraisal rights only to stockholders of a “constituent corporation” in a merger or consolidation; a parent corporation is not a constituent corporation merely because its subsidiary is a merger party.
- In applying § 262, Delaware courts look to the legal form of the transaction specified in the statute, not the transaction’s economic effects on stockholders who are not parties to the merger.
- The statutory appraisal framework is built around a stockholder’s surrender or exchange of shares in the merger; where stockholders keep their shares, § 262 does not provide appraisal.
- A stockholder vote on related corporate actions (such as approving share issuance or increasing authorized shares) does not, by itself, convert the voting corporation into a “constituent corporation” for § 262 purposes.

## Conclusion

The Court of Chancery held that Dr Pepper stockholders had no statutory appraisal rights under DGCL § 262 for the Keurig combination because Dr Pepper was not a merger constituent in the reverse triangular merger between its subsidiary and Maple Parent, and because Dr Pepper stockholders received a special dividend while retaining their shares rather than surrendering them in the merger.


City of North Miami Beach General Employees' Retirement Plan v. Dr Pepper Snapple Group, Inc., 189 A.3d 188 (2018)