## Facts

- M.P.M. Enterprises, Inc. (MPM) was a closely held Delaware corporation that designed and manufactured equipment used in electronics production.
- In 1995, MPM merged into a Cookson Group, PLC subsidiary for $65 million at closing plus contingent “earn-out” payments of up to $73.635 million based on post-merger performance.
- Jeffrey D. Gilbert, a minority stockholder (about 7.273% fully diluted), dissented from the merger and sought statutory appraisal under 8 Del. C. § 262, alleging the merger consideration undervalued his shares.
- At trial, MPM’s expert presented (i) a “buy-side” analysis tied to the merger terms and two prior third-party equity offers, and (ii) a “sell-side” DCF valuation of about $90.5 million, reduced to about $81.7 million after deductions for claimed employee-related obligations and costs.
- Gilbert’s expert used DCF and a public-company comparables approach, yielding a much higher valuation (about $357.1 million).
- The Court of Chancery relied primarily on DCF, rejected MPM’s buy-side analysis as incorporating merger-related value, discounted the comparables evidence as insufficiently comparable, modified Gilbert’s DCF inputs, and set fair value at about $156.3 million as of the merger date.
- MPM appealed, arguing the court improperly ignored the merger price and prior offers and failed to deduct alleged obligations to non-stockholder employees that purportedly diluted equity value.

## Issues

1. In a § 262 appraisal, may the Court of Chancery assign no weight to merger consideration and prior third-party offers and instead base fair value primarily on a DCF valuation?
2. Did the Court of Chancery err by refusing to reduce fair value for alleged dilutive obligations to non-stockholder employees?

## Decision

- The Delaware Supreme Court affirmed the appraisal judgment.
- The Court held the Court of Chancery did not commit legal error or abuse its discretion by giving no weight to the merger terms and prior third-party offers where they were unreliable for § 262 purposes.
- The Court held the Court of Chancery acted within its discretion in selecting DCF as the principal method and in modifying expert assumptions to reach a record-supported valuation.
- The Court upheld the refusal to deduct alleged employee-related obligations because MPM failed to prove their existence and valuation with sufficient credible evidence.

## Legal Principles

- A Delaware statutory appraisal under 8 Del. C. § 262 determines the corporation’s “fair value” as a going concern on the merger date, excluding value arising from the merger itself (including merger-specific synergies).
- The Court of Chancery has discretion to select among accepted valuation methodologies, including DCF, and may adjust expert models and inputs when supported by the record.
- Merger price and prior offers are not automatically determinative of fair value and may be disregarded if tainted by merger-related considerations or otherwise unreliable for appraisal.
- Claimed deductions that would reduce equity value (including alleged obligations to non-stockholder employees) must be proven with credible evidence as existing and measurable as of the valuation date.
- On appeal, legal questions are reviewed independently, while valuation choices and factfinding are reviewed deferentially for abuse of discretion or clear error.

## Conclusion

The Delaware Supreme Court affirmed an appraisal valuing MPM at about $156.3 million, holding that the trial court properly relied on a modified DCF, permissibly discounted merger-based indicators of value affected by merger-specific considerations, and declined unproven deductions for alleged employee-related obligations.


M.P.M. Enters., Inc. v. Gilbert, 731 A.2d 790 (Del. 1999)