DFC Global has appealed a ruling by the Delaware Chancery Court that Lone Star Fund VIII underpaid for DFC Global by more than $100 million in a $1.3 billion transaction whereby Lone Star Fund VIII acquired the payday lender. In 2016, Chancellor Bouchard ruled in an appraisal proceeding (an action brought by an investor who believes that she was not adequately compensated in a corporate buyout) that shareholders in DFC Global had been significantly underpaid when selling their shares in the buyout. The Court found that the fair market value of DFC Global shares was materially higher than the buyout price. In its appellate brief, DFC Global argues that the deal price should be deemed the best indicator of fair value because there was a sales process that resulted in an arm'slength transaction. As a result, DFC Global argues that the Chancery Court should not have the ability to independently evaluate the transaction price. The trial court disagreed, refusing to defer to the deal price in light of the "uncertain regulatory environment" that served as the backdrop for this transaction. As the Court explained, the transaction was negotiated and consummated during a period of significant company turmoil and regulatory uncertainty, calling into question the reliability of the transaction price as well as management's financial projections.
The case has garnered significant interest in the business and legal communities. Nine law and corporate finance professors filed an amicus brief in support of DFC Global, urging the Delaware Supreme Court to rule that the Chancery Court must defer to the transaction price when a deal results from arm'slength negotiations. On the other hand, BLB&G represented twenty-one leading law, economics, and corporate finance professors, including a Nobel prize winner, who filed an amicus brief supporting the Chancery Court's ability to independently determine the value of a company. This amicus brief points out that a hard-line rule is unnecessary because, among other things, the Chancery Court's opinion can be appealed. The academics who favor affirming the Chancery Court's opinion argue that adopting a rule that presumptively requires the Court of Chancery to defer exclusively to the transaction price unless that process does not result from an arm's-length process would be "a trifecta of bad law, bad economics, and bad policy." These professors point out that deference to the deal price in appraisal actions is the functional equivalent of eliminating the appraisal remedy altogether.