## Facts

- Sabre Holdings Corp. owned about 82% of Travelocity.com Inc. and acquired the remaining public shares through a 2002 tender offer followed by a short-form merger.
- The merger consideration was $28 per share in cash.
- Minority stockholders perfected appraisal rights and filed an appraisal action seeking a judicial determination of “fair value” as of the merger date.
- Travelocity operated in a relatively new and volatile online travel market; post–September 11 conditions increased uncertainty and made forecasting difficult.
- The parties presented competing valuation experts:
  - Respondents’ expert opined the going-concern value was about $20 per share.
  - Petitioners’ expert opined value exceeded the merger price (at least $35 per share shortly before the merger).
- Both sides used discounted cash flow (DCF) and comparable-company analyses, with Expedia as the principal comparable, but diverged on growth, risk, and the reliability of management projections.
- After the valuation decision, respondents sought reconsideration under Court of Chancery Rule 59(f), alleging computational errors.

## Issues

1. What was the “fair value” of Travelocity shares as of the effective time of the short-form merger under Delaware’s appraisal statute?
2. Given industry volatility and uncertain projections, what valuation method(s) should be used (DCF, comparable-company multiples, or a combination)?
3. If market multiples are used, whether and how to apply a control premium and other numerical inputs to reach a per-share appraisal value.
4. Whether the court should revise the appraisal determination on reconsideration due to misapprehension of law or fact, including arithmetic or computational errors.

## Decision

- The Court of Chancery determined fair value above the $28 merger price and entered judgment for petitioners (with statutory interest).
- The court rejected both parties’ DCF analyses as unreliable because no dependable long-range projections supported the models.
- The court primarily relied on a comparable public-company approach using Expedia, employing EBITDA and EPS multiples and weighting the results two-thirds and one-third, respectively.
- The court then applied a 30% control premium to the market-multiple-derived value and, in the original opinion, concluded fair value was $32.76 per share.
- On Rule 59(f) reconsideration, the court granted limited relief to correct specific computational errors but left the valuation framework (comparables plus a 30% control premium) intact.

## Legal Principles

- In a Delaware appraisal, the court has discretion to use valuation methods generally accepted in the financial community and to select the approach best suited to the evidentiary record.
- DCF analysis may be discounted or rejected where long-term projections are too speculative, particularly in a volatile or immature market.
- Comparable-company trading multiples can be used as primary valuation evidence when internal forecasts are unreliable, including through selection of an appropriate peer and appropriate financial multiples and weighting.
- When a valuation begins from minority, market-trading multiples, the court may apply a control premium to reflect value on a control basis, consistent with appraisal “fair value” doctrine as applied to the facts.
- The court is not required to adopt either expert’s valuation in full; it may accept specific analyses or inputs it finds reliable and reject others.
- Reargument/reconsideration under Rule 59(f) may be granted when the court misapprehended or overlooked controlling law or material facts, including computational mistakes that affect the result.

## Conclusion

The Court of Chancery appraised Travelocity in a controller-led short-form merger by rejecting DCF models grounded in speculative projections, valuing the company primarily through Expedia-based comparable-company multiples, and applying a 30% control premium to reach a per-share fair value exceeding the merger price, with limited computational corrections on reconsideration.


Doft & Co. v. Travelocity.com Inc., 2004 WL 1152338 (Del. Ch. 2004)