## Facts

- CKx, Inc., a Delaware corporation, owned media and entertainment assets, with value concentrated in a small number of properties, especially *American Idol*.
- In 2011, CKx pursued strategic alternatives and conducted a sale process involving multiple private-equity bidders.
- An Apollo Global Management affiliate ultimately acquired CKx in a cash-out merger for $5.50 per share, after increasing an earlier indication of interest around $5.00 per share.
- Certain stockholders dissented, perfected appraisal rights under 8 Del. C. § 262, and sought a judicial determination of fair value as of the merger date.
- At trial, petitioners’ expert valued CKx at about $11.02 per share using a DCF and a comparable-companies approach.
- CKx’s expert valued CKx at about $4.41 per share using a DCF.
- Both sides’ DCF models relied on projections prepared for negotiations and potential transactions, not ordinary-course management forecasting, in a business subject to volatile performance and contract-renewal risk.
- The record contained limited evidence of merger-specific synergies and their magnitude; after trial, the parties did not materially supplement the evidentiary record on synergies.

## Issues

1. What is the fair value of CKx as a going concern as of the merger date under 8 Del. C. § 262?
2. Should fair value be determined primarily by traditional valuation methods (DCF and market multiples) or by the merger price from the sale process?
3. If the merger price is used, must it be adjusted to exclude merger-specific value such as buyer synergies?

## Decision

- The Court of Chancery determined fair value at $5.50 per share, matching the merger consideration.
- The court declined to adopt either party’s DCF analysis due to speculative inputs and reliance on non-ordinary-course projections in a volatile business.
- The court gave little to no weight to petitioners’ comparable-companies analysis because the proposed companies were not sufficiently comparable to CKx’s concentrated, hit-driven asset mix.
- The court treated the arm’s-length, competitive sale process as producing the best available indicator of going-concern value on the record presented.
- Although appraisal law requires excluding merger-specific value (including synergies), the court found the evidentiary basis for a meaningful synergy adjustment insufficient and therefore did not reduce the merger price.

## Legal Principles

- In a statutory appraisal, fair value is the corporation’s going-concern value as of the merger date, excluding value arising from the accomplishment or expectation of the merger (including deal-specific synergies).
- A court may rely on the merger price as evidence of fair value when the transaction results from an informed, arm’s-length, competitive process and alternative valuation methods are unreliable.
- DCF analyses are sensitive to the reliability of management projections; projections prepared for negotiations or transactions, especially in uncertain businesses, may warrant reduced weight.
- Comparable-company multiples require genuine comparability; where a company’s asset profile and risk are idiosyncratic, trading multiples may not provide a dependable valuation cross-check.
- The party seeking an adjustment to deal price (for example, to remove synergies) bears the practical burden of providing a credible evidentiary basis and quantification.

## Conclusion

The court held that CKx’s fair value in appraisal was the $5.50 per-share merger price because the sale process provided a reliable market-based measure and the competing DCF and comparables analyses rested on speculative assumptions, with no adequate record to support a material synergy adjustment.


Huff Fund Inv. P’ship d/b/a Musashi II Ltd. v. CKx, Inc., 2013 WL 5878807 (Del. Ch. 2013)