## Facts

- Regal Entertainment Group, a publicly traded movie-theater chain, was acquired by Cineworld Group plc in a reverse triangular merger that closed on February 28, 2018.
- Regal stockholders received $23.00 per share in cash.
- The transaction followed a pre-signing market check and a post-signing go-shop period.
- Former stockholders who dissented from the merger pursued a statutory appraisal to determine “fair value” under 8 Del. C. § 262 as of the merger’s effective time, excluding merger-specific value.
- At trial, petitioners urged a discounted cash flow (DCF) valuation of $33.83 per share.
- The respondent (with Cineworld treated as the real party in interest) urged market-based measures, emphasizing unaffected trading price and the deal price adjusted to remove synergies; it proposed an approach yielding $18.02 per share by equally weighting unaffected price and deal price minus synergies.

## Issues

1. What valuation evidence most reliably determines Regal’s fair value in an appraisal proceeding: DCF, unaffected trading price, deal price minus synergies, or a combination?
2. If the court relies on the deal price, how should it (a) deduct merger-specific value (synergies) and (b) adjust for changes in Regal’s standalone value between signing and closing?

## Decision

- The Court of Chancery determined fair value primarily using the deal price as the most reliable evidence of Regal’s value at signing, consistent with recent Delaware appraisal precedent for arm’s-length transactions involving a widely traded company.
- The court deducted $3.77 per share from the $23.00 merger price as the portion of anticipated synergies reflected in the deal consideration and allocated to Regal stockholders.
- The court then adjusted the deal-price-minus-synergies figure to account for changes in Regal’s value between signing and closing, because appraisal value is measured at the merger’s effective time.
- The court declined to adopt petitioners’ DCF as the primary determinant of fair value and rejected Cineworld’s proposed equal-weight averaging of unaffected trading price and deal price minus synergies, treating trading-price evidence as corroborative rather than co-equal.

## Legal Principles

- In a DGCL § 262 appraisal, fair value is the corporation’s value as of the merger’s effective time, excluding any element of value arising from the accomplishment or expectation of the merger (including synergies).
- For an arm’s-length acquisition of a widely traded company after a meaningful sale process, the market-tested deal price can be the most reliable indicator of fair value, subject to appropriate statutory adjustments.
- “Deal price minus synergies” is a permissible and often persuasive appraisal methodology when the court can estimate and remove merger-specific value embedded in the price.
- When there is a meaningful interval between signing and closing, the court may adjust a signing-date deal-based valuation to reflect intervening changes in the target’s standalone value.
- DCF analysis remains an accepted valuation tool, but a court may discount litigation-driven models when reliable market evidence is available.

## Conclusion

The court set Regal’s appraisal fair value by starting with the $23.00 deal price, subtracting $3.77 per share for synergies attributed to the merger, and adjusting for value changes between signing and closing, while declining to use petitioners’ DCF or a mechanical averaging of market indicators as the primary valuation measure.


In re Appraisal of Regal Entertainment Group, 2021 WL 1916364 (Del. Ch. 2021)