## Facts

- Aruba Networks, Inc., a publicly traded company, agreed to be acquired by Hewlett-Packard Company in a third-party, arm’s-length merger for $24.67 per share.
- Aruba’s 30-day average unaffected trading price before deal leakage was $17.13 per share; the stock price increased after deal rumors and later after release of favorable quarterly results.
- Stockholder funds sought statutory appraisal under 8 Del. C. § 262, claiming fair value of $32.57 per share.
- Aruba’s appraisal expert opined fair value was $19.10 per share, calculated as the deal price minus merger synergies.
- After trial, the Court of Chancery determined fair value was $17.13 per share, relying on unaffected market price and reasoning that it was a reliable proxy for fair value in an efficient market.
- The Court of Chancery adopted the unaffected market price approach post-trial, resulting in a value below Aruba’s own litigation position.
- The stockholders appealed.

## Issues

1. Whether the Court of Chancery abused its discretion under 8 Del. C. § 262 by basing fair value solely on the 30-day average unaffected market price.
2. Whether, given the sale process and record evidence, the deal price minus synergies was the most reliable indicator of fair value on the merger date.
3. Whether the Court of Chancery’s reliance on “reduced agency costs” as a merger-related value embedded in the deal price was supported by the record.

## Decision

- The Delaware Supreme Court reversed the Court of Chancery.
- The Court held the Chancery Court abused its discretion by relying exclusively on unaffected market price to set fair value at $17.13 per share.
- The Court ruled that the deal price minus synergies was more reliable on this record and ordered entry of judgment at $19.10 per share (Aruba’s expert’s deal-price-minus-synergies figure).
- The case was remanded with instructions to enter final judgment for the petitioners at $19.10 per share.

## Legal Principles

- In a § 262 appraisal, fair value must exclude value arising from the accomplishment or expectation of the merger, including merger-specific synergies.
- Arm’s-length merger consideration, adjusted to deduct merger synergies, is strong evidence of fair value when the buyer is well-informed and the process is robust.
- Unaffected market price in an efficient market can be informative, but it is not an obligatory or exclusive measure of fair value.
- A valuation methodology must be grounded in the evidentiary record; factual predicates (including claims about agency-cost reductions) cannot rest on unsupported assumptions.
- Timing and information matter in weighing market price: an unaffected price that is months removed from the valuation date and lacks material nonpublic information may understate fair value relative to an informed deal price.

## Conclusion

The Delaware Supreme Court required that Aruba’s fair value in appraisal be set at the deal price minus synergies, rejecting the exclusive use of unaffected market price where the record showed an arm’s-length, informed transaction and lacked support for treating market price as a superior, merger-uncontaminated measure.


Verition Partners Master Fund Ltd. v. Aruba Networks, Inc., 210 A.3d 128 (Del. 2019)