## Facts

- Universal Pictures Co. merged into Universal City Studios, Inc. on March 25, 1966.
- Universal City Studios offered minority shareholders $75 per share; certain shareholders dissented and sought appraisal under 8 Del. C. § 262.
- A Court of Chancery appraiser valued the shares at $91.47 per share using an earnings value of $92.89 and an asset value of $85.82, weighted 80% and 20%, respectively.
- On exceptions, the Court of Chancery accepted the $92.89 earnings figure, revised the asset value to $91.72, and reweighted the components to 87.5% earnings and 12.5% assets, yielding $92.75 per share.
- The surviving corporation appealed, challenging the earnings multiplier used to derive earnings value and the asset valuation.
- The dissenting stockholders cross-appealed, seeking changes to the interest awarded on the appraisal amount.

## Issues

1. Whether the Court of Chancery clearly erred in accepting the earnings multiplier and resulting earnings-value component, including reliance on comparable motion-picture companies and Universal’s earnings history.
2. Whether the Court of Chancery clearly erred in determining asset value, including treatment of the film library and related intangible or going-concern elements.
3. Whether the interest awarded on the appraisal recovery was properly determined in rate and structure consistent with Delaware appraisal principles.

## Decision

- The Delaware Supreme Court largely affirmed the Court of Chancery’s valuation methodology and resulting per-share value (approximately $92–$93).
- The Court upheld the use of earnings value and asset value as determinants of fair value, with earnings receiving the dominant weight for an ongoing operating company.
- The Court sustained the general approach to selecting and applying an earnings multiplier, concluding the Chancery Court’s acceptance of the multiplier was supported by the record and not clearly erroneous.
- The Court approved the basic asset-valuation approach, treating asset value as a reasonableness check on an earnings-based result and allowing adjustments from book values to economic worth.
- The Court modified the interest component in part, holding interest should compensate dissenters for the delay in receiving fair value from the merger date to payment, without serving as a penalty.

## Legal Principles

- In a Delaware appraisal, fair value may be determined by combining valuation factors such as earnings value and asset value with assigned weights; the weighting depends on the company and the record.
- The Court of Chancery has substantial discretion as factfinder in appraisal valuation; appellate review is deferential and will not disturb valuation judgments absent clear error.
- An earnings capitalization/multiplier analysis may consider comparable companies, historical earnings trends, and reasonably anticipated future income as of the merger date.
- Asset value remains relevant where the company holds material tangible and intangible assets; appraisal may adjust accounting figures to reflect economic value as of the valuation date.
- Interest in appraisal actions is compensatory, intended to make dissenters whole for the lost use of money during the period between the merger and payment.

## Conclusion

The court sustained the appraisal valuation that relied primarily on earnings capitalization with a secondary asset-value check, deferring to the Court of Chancery’s supported judgment on multipliers, comparables, and asset treatment, while revising the interest award to better reflect appraisal’s compensatory purpose.


Universal City Studios, Inc. v. Francis I. duPont & Co., 334 A.2d 216 (Del. 1975)