A recent Delaware Business Court Insider story, “Grant & Eisenhofer Wins Bid for Fees, Expenses in Dell Merger Case,” reports that the Delaware Court of Chancery awarded a total of $8 million in attorney fees and expenses to Grant & Eisenhofer, the Wilmington-based firm that persuaded the court that Dell Inc.'s $24.4 billion going-private sale had shortchanged investors by nearly 30 percent.
The award breaks down almost evenly between the two categories, as Vice Chancellor J. Travis Laster approved $4,007,462 in expenses and up to $4,043,705 in attorney fees for the firm, which represented 10 of 13 claimants seeking appraisal for their shares in Michael Dell's computer technology company.
Among them was a group of entities affiliated with T. Rowe Price & Associates, which held the largest block of shares in the appraisal proceeding.
In May, Laster booted T. Rowe's approximately 27 million shares because of a computer glitch that caused the shares to be voted in favor of the merger. Though T. Rowe had been publicly opposed to the merger, Laster disqualified the shares under Delaware's dissenter requirement, which mandates that investors who wish to seek appraisal vote their shares against the deal.
Two weeks later, the vice chancellor returned a 114-page opinion finding that the $13.75 per-share price private equity firm Silver Lake paid fell $3.87 per share shy of the company's actual fair value. Including the statutory default interest rate, the firm's victory secured an aggregate benefit of more than $25.2 million for the 5.5 million shares remaining in the appraisal class.
Following Laster's opinion, Magnetar Capital Master Fund and Global Continuum Fund, which Grant & Eisenhofer did not represent, opposed a motion filed on behalf of the firm for fees and expenses. They argued that the significant expenses Grant & Eisenhofer incurred defending T. Rowe's appraisal eligibility should be excluded from the award, and that T. Rowe should bear some of the costs for litigating valuation issues.
But Laster found the request for expense reimbursement to be reasonable, especially given the firm's investment in retaining expert valuation witnesses, who were able to sway the court, while also adding an "extra layer of expense" to the proceeding.
"In my view, even with the reduced number of shares, this was a case that required the highest level of investment," Laster said. "Facing skilled defense counsel who retained eminent experts of their own, G&E had to hire similarly high-caliber experts and expend the resources necessary to achieve a successful outcome."
And Delaware's appraisal statute, he added, precluded the court from shifting expenses to a former stockholder that was not eligible to appraisal.
On the issue of the fee award, Laster said Grant & Eisenhofer was entitled to the requested $3.9 million, plus interest as of Sept. 30. In fact, the vice chancellor said, the amount fell well below what the court might award independently as a reasonable fee. The $25 million result and the overriding complexity of the case "easily satisfies the test of reasonableness," he said.
"G&E had to conduct discovery into the sale process and develop well-supported arguments as to why the process fell short for purposes of price discovery. That complex task added significantly to the challenging nature of the case," Laster said. "The complicated factual issues and the need for extensive discovery made this case more complex than most."
Stuart M. Grant, lead attorney from Grant & Eisenhofer, said Laster had followed Delaware statute to ensure that the parties paid their "fair share," based on the $25 million result his firm was able to secure in the appraisal action.
Grant acknowledged that the outcome would have been even more favorable had it not been for T. Rowe's early exit, but he nonetheless considered it a "very good result."