Ashby & Geddes Obtains Decision Upholding Stockholders’ Entitlement to Appraisal of Shares of Stock Purchased After the Record Date for a Merger

In Merion Capital LP v. BMC Software, Inc., C.A. No. 8900-VCG (Del. Ch. Jan. 5, 2015), Ashby & Geddes obtained a decision from the Delaware Court of Chancery holding that petitioners Merion Capital LP and Merion Capital II LP (collectively, “Merion”) were entitled to an appraisal of shares of stock they purchased after the record date for the stockholder vote on the underlying merger and owned of record on the date of their demand for appraisal.  The Court’s decision can be found here.

Pursuant to 8 Del. C. § 262, Merion sought appraisal of 7,629,100 shares of common stock of BMC Software, Inc. (“BMC”) in connection with a merger in which BMC was taken private by a consortium of private equity investors.  Merion had purchased the shares of stock on the open market after the record date for the stockholder vote on the merger.  Prior to the stockholder vote, Merion, as the record holder of the shares, delivered to BMC a demand for appraisal.  Following the effective date of the merger, Merion timely filed a petition for appraisal in the Court of Chancery.

BMC moved for summary judgment, contending that Merion was required to prove that each specific share of stock for which Merion sought appraisal was not voted in favor of the merger by a prior beneficial owner.  The Court rejected BMC’s contention, finding that the unambiguous language of Delaware’s appraisal statute did not give rise to any such share-tracing requirement.  Crediting Merion’s argument, the Court held that in order to perfect appraisal rights, a petitioner must show that the record holder of the shares for which appraisal is sought: (1) held the shares on the date it made a demand for appraisal; (2) continuously held the shares through the effective date of the merger; (3) timely delivered to the corporation a written demand for appraisal; and (4) did not vote in favor of the merger.  Because it was undisputed that Merion had satisfied those four requirements, the Court held that “Merion has perfected its right to have its 7,629,100 shares of BMC common stock appraised by this Court” and denied BMC’s motion for summary judgment.

Ashby & Geddes attorneys Stephen E. Jenkins, Steven T. Margolin, Marie M. Degnan, and Phillip R. Sumpter represented Merion in this action.