## Facts

- Columbia Pipeline Group, Inc. was a publicly traded Delaware midstream energy company operating natural gas pipeline and related assets.
- Columbia pursued growth by expanding pipeline capacity to serve shale gas production regions.
- Columbia and TransCanada Corporation entered a merger agreement dated March 17, 2016.
- The merger closed on July 1, 2016, converting each share of Columbia common stock into the right to receive $25.50 in cash.
- Former stockholders dissented and sought statutory appraisal under 8 Del. C. § 262 rather than accept the merger consideration.
- Petitioners contended fair value exceeded $25.50 and relied primarily on a discounted cash flow (DCF) valuation using management projections and asserted growth value.
- Columbia argued fair value should track market-based indicators, emphasizing the deal price and the company’s trading price given an arm’s-length process and an informed public market.
- After a trial with extensive fact and expert evidence, the Court of Chancery issued a post-trial decision determining fair value.

## Issues

1. What was the fair value of Columbia’s common stock as of the July 1, 2016 merger effective date under 8 Del. C. § 262?
2. On this record, should the court rely primarily on deal price (with or without synergy adjustments), market evidence, or a DCF analysis?

## Decision

- The Court of Chancery determined that fair value was $25.50 per share, equal to the merger consideration.
- The court treated the deal price and related market evidence as persuasive indicators of going-concern value because the transaction resulted from informed, arm’s-length negotiations and a broad buyer outreach.
- Although appraisal excludes value arising from the merger itself, the court found no reliable basis to quantify and deduct merger-specific synergies that would move the valuation materially below $25.50.
- The court declined to credit petitioners’ DCF because it depended on aggressive inputs and projections and produced results that materially conflicted with the unaffected trading price and the price from the sale process.
- Judgment awarded $25.50 per share (plus statutory interest) to the appraisal petitioners.

## Legal Principles

- Appraisal under 8 Del. C. § 262 seeks the corporation’s going-concern value as of the merger date and excludes value arising solely from the accomplishment or expectation of the merger.
- The Court of Chancery may consider all relevant valuation factors; no single methodology is mandatory, and the court must select a value supported by the evidentiary record.
- When a public company is sold through an informed, arm’s-length process without structural defects, the deal price often is strong evidence of fair value.
- Market evidence, including an actively traded stock price in a well-informed market, can corroborate the reliability of deal price as an indicator of fair value.
- A DCF analysis may be rejected where its projections and inputs are not shown to be reliable and where it diverges sharply from objective market-based indicators without persuasive justification.
- A party seeking to adjust deal price for synergies must support a reliable quantification of merger-specific value to justify moving away from the negotiated price.

## Conclusion

The Court of Chancery concluded that the most reliable measure of Columbia’s fair value at the merger date was the $25.50 per-share deal price, declined to make a synergy deduction on the record presented, and rejected a petitioners’ DCF that conflicted with market evidence.


In re Appraisal of Columbia Pipeline Group, Inc., 2019 WL 3778370 (Del. Ch. Aug. 12, 2019)