## Facts

- Alcoma Corp. owned approximately 54% of Okeechobee, Inc.; Paskill Corp. owned about 14.6% as a minority stockholder.
- Okeechobee held substantial appreciated assets, largely citrus groves and related real estate.
- On November 12, 1997, Okeechobee, Inc. merged into Okeechobee LLC, a Delaware LLC wholly owned by Alcoma.
- The merger cashed out minority stockholders, triggering appraisal rights to receive the statutory “fair value” of their shares under 8 Del. C. § 262.
- In the appraisal proceeding, the Court of Chancery used a net asset value approach and set fair value at $10,049 per share.
- The Court of Chancery deducted estimated future capital-gains taxes tied to asset appreciation, but did not deduct projected future selling expenses tied to hypothetical asset sales.
- Paskill appealed the deduction of future taxes as speculative and liquidation-based; Alcoma cross-appealed seeking deductions for future selling expenses and challenging the interest award.

## Issues

1. Whether an appraisal under 8 Del. C. § 262 may reduce going-concern value by deducting speculative future capital-gains taxes attributable to unrealized appreciation where no liquidation or asset sale is imminent.
2. Whether the appraisal court must deduct projected future selling expenses associated with hypothetical, uncontemplated asset sales when using a net asset value methodology.
3. Whether the Court of Chancery’s interest award should be disturbed when the valuation is reversed and remanded.

## Decision

- The Delaware Supreme Court reversed and remanded for a new determination of fair value.
- The Court held the Court of Chancery erred by valuing the company on a liquidation basis and deducting speculative future capital-gains tax liabilities.
- The Court held the Court of Chancery correctly excluded speculative future selling expenses tied to uncontemplated asset sales.
- The challenge to the interest award was moot in light of the reversal of the appraisal judgment.

## Legal Principles

- “Fair value” in a Delaware appraisal is the value of the corporation as a going concern on the merger date, absent proof that liquidation or a sale of assets is imminent.
- Valuation inputs should reflect the corporation’s operative reality at the merger date; contingent costs from hypothetical future transactions generally may not be treated as present liabilities.
- Capital-gains taxes on unrealized appreciation are speculative and should not be deducted from value unless a transaction triggering the tax is planned or otherwise impending.
- Likewise, projected selling expenses (e.g., commissions, closing costs) tied to uncontemplated asset sales are speculative and may be excluded from net asset value calculations.

## Conclusion

The Delaware Supreme Court required appraisal value to be determined on a going-concern basis and rejected valuation adjustments that effectively assume liquidation, holding that speculative future capital-gains taxes cannot be deducted absent an imminent taxable transaction while affirming the exclusion of similarly speculative selling expenses; the case was remanded for a new valuation and the interest dispute was mooted.


Paskill Corp. v. Alcoma Corp., 747 A.2d 549 (Del. 2000)