## Facts

- MPM Enterprises, Inc. (MPM) was a closely held Delaware corporation that manufactured screen printers used in the surface-mount technology (SMT) industry.
- The SMT market and MPM’s business expanded rapidly in the early 1990s; from fiscal years 1991–1994, MPM’s sales rose from about $13.5 million to $55.5 million, and net income rose from about $8,300 to $6.5 million.
- Jeffrey D. Gilbert was a former director and minority stockholder of MPM, owning about 8% of the company (approximately 7.273% on a fully diluted basis) through holdings of common and preferred stock.
- In March 1995, MPM and Cookson Group PLC entered into a merger agreement under which MPM would merge into a Cookson subsidiary.
- The merger consideration included an immediate cash payment to MPM stockholders of about $62.698 million, plus possible earn-out payments of up to about $73.635 million based on post-merger performance.
- If Gilbert had accepted the merger consideration, he would have received about $4.56 million in cash at closing and could have received up to about $5.36 million more through the earn-out.
- Gilbert dissented from the merger and pursued a statutory appraisal under 8 Del. C. § 262 to determine the fair value of his shares as of the May 2, 1995 merger date.
- In the appraisal action, both sides presented discounted cash flow (DCF) valuations and related testimony. Gilbert’s valuation placed his shares at roughly $26 million, while MPM’s valuation placed them at roughly $5.9 million.

## Issues

1. What was the fair value of Gilbert’s MPM shares as of the May 2, 1995 merger date under 8 Del. C. § 262, excluding any value arising from the merger itself?
2. How should the Court of Chancery evaluate and reconcile the parties’ competing DCF valuations and assumptions in determining fair value?
3. What rate and form of interest (simple or compound) should be awarded on the appraisal amount from the merger date until payment under § 262?

## Decision

- The Court of Chancery determined the fair value of Gilbert’s shares as of May 2, 1995, applying § 262’s going-concern standard and excluding value attributable to the merger transaction itself.
- The court did not adopt either party’s DCF analysis wholesale; instead, it evaluated the competing assumptions and constructed a court-driven DCF valuation using inputs it found most reliable.
- The court entered an appraisal award for Gilbert based on that independent valuation.
- The court awarded compound interest on the appraised fair value from the merger date through the date of payment, concluding that compounding was appropriate to compensate Gilbert for the time value of money during the delay in payment.

## Legal Principles

- In a Delaware statutory appraisal under 8 Del. C. § 262, “fair value” is determined as of the merger date by valuing the corporation as a going concern, and the court must exclude any element of value that arises from the expectation or accomplishment of the merger.
- The Court of Chancery is not required to choose between the parties’ valuations; it may accept, reject, or modify expert inputs and may build its own valuation from the trial record.
- DCF analysis is a commonly used tool in Delaware appraisal litigation, but its outcome depends heavily on the soundness of management projections, growth assumptions, discount rates, and terminal value assumptions.
- Deal terms, including contingent earn-out features, may be considered as part of the overall record, but they do not control the statutory fair-value determination, which is an intrinsic, merger-excluded measure of value.
- Section 262 authorizes the Court of Chancery to award interest on the appraisal amount from the merger date until payment, and the court may award compound interest when needed to provide a fair return during the period the stockholder was deprived of the merger consideration.

## Conclusion

Gilbert, a dissenting minority stockholder, was entitled to a judicial determination of the fair value of his MPM shares as of the merger date, and the Court of Chancery reached that value by making its own DCF-based appraisal rather than adopting either side’s model; the court also awarded compound interest under § 262 to compensate for the delay between the May 2, 1995 merger and payment.


Gilbert v. MPM Enterprises, Inc., 709 A.2d 663 (1997)