## Facts

- Rapid-American Corporation was a publicly traded conglomerate with three operating subsidiaries.
- Rapid and R.K. Holding Corporation merged into Kenton Corporation on January 31, 1981, and Rapid became privately held after the transaction.
- Dissenting stockholders who held 58,400 Rapid shares sought statutory appraisal under 8 Del. C. § 262, alleging the merger consideration (cash and securities valued at about $28 per share) was below fair value.
- After trial, the Court of Chancery appraised the shares at $51 per share and awarded simple interest.
- The Court of Chancery accepted the dissenters’ expert method that valued Rapid by valuing its constituent operating businesses, producing a single enterprise value for Rapid.
- The Court of Chancery declined to add a “control premium” in valuing the subsidiaries, treating it as an improper adjustment at the stockholder level.
- Rapid appealed, claiming the segmented method was legally improper and produced an unrealistic result given Rapid’s pre-merger market price.
- The dissenters cross-appealed, arguing a control premium should have been included and that interest should have been compounded.

## Issues

1. Whether an appraisal court may adopt a valuation method that values a conglomerate by valuing its operating components, rather than valuing only an integrated whole, to determine statutory “fair value” under 8 Del. C. § 262.
2. Whether it was error to exclude a control premium where the corporation’s value derived from 100% ownership of operating subsidiaries.
3. Whether the Court of Chancery misapplied § 262 or abused its discretion by awarding simple instead of compound interest.

## Decision

- The Delaware Supreme Court affirmed the Court of Chancery’s adoption of the segmented valuation methodology.
- The Court reversed the refusal to consider a control premium and remanded for reconsideration of fair value consistent with recognizing corporate-level control in wholly owned subsidiaries.
- The Court affirmed the award of simple interest, holding § 262 leaves the form of interest to the Court of Chancery’s discretion absent abuse.

## Legal Principles

- In a § 262 appraisal, the objective is the corporation’s unitary going-concern fair value, and the Court of Chancery has discretion to select among valuation methods supported by the record.
- Valuing a conglomerate by separately valuing its operating businesses can be permissible if it results in a single fair value for the corporation and is justified by the evidence.
- When the corporation owns 100% of a subsidiary, control can be a feature of the corporate asset being appraised; excluding control value on the theory it is a stockholder-level adjustment can be reversible error.
- Under 8 Del. C. § 262, the Court of Chancery has discretion to set the rate and form of interest; the statute does not require compound interest.

## Conclusion

The Delaware Supreme Court largely sustained the appraisal court’s methodological discretion, but held that fair value must reflect corporate-level control inherent in wholly owned subsidiaries; it remanded for a revised valuation while leaving intact the award of simple interest under § 262.


Rapid-American Corp. v. Harris, 603 A.2d 796 (Del. 1992)