Court of Chancery Rejects Extending Appraisal Rights Based on the “Underlying Economic Reality” of a Merger Structure—North Miami v. Dr Pepper Snapple
By: Andrew J. Colosimo, Warren S. de Wied, Steven Epstein, Christopher Ewan, Arthur Fleischer, Jr., Andrea Gede-Lange, David J. Greenwald, Randi Lally, Mark H. Lucas, Scott B. Luftglass, Brian T. Mangino, Brian Miner, Philip Richter, Robert C. Schwenkel, David L. Shaw, Peter L. Simmons, Matthew V. Soran, Steven J. Steinman, Gail Weinstein, Maxwell Yim
In North Miami v. Dr Pepper Snapple (June 1, 2018), the Delaware Court of Chancery held that appraisal rights are not available to the stockholders of Dr Pepper in connection with a transaction structure (involving a reverse triangular merger and a special cash dividend to the target stockholders) which will result in the sale of control of the company. The decision is significant in that the court stated that it will not “look through” a transaction structure to the “underlying economic and practical effect” in order to grant appraisal rights when they are not otherwise specifically provided under a “plain reading” of the statute. As discussed in the Practice Points offered in the attached Briefing, in our view, the Dr Pepper structure may be used in future conflicted controller transactions, but it is unlikely to be employed more broadly for the sole purpose of eliminating appraisal rights.
