Average Market Price Not Proper Benchmark
After several months of negotiations regarding a merger between Hewlett Packard and Aruba Networks, the board decided to accept HP's offer of $24.67 per share. After news of the deal and favorable quarterly results caused a jump in Aruba's stock price the parties finalized the deal at the same $24.67 per share. Thereafter the Aruba stockholders petitioned for appraisal of the fair value of their shares. The Delaware Court of Chancery set the fair value at $17.13 per share using the company’s 30-day average market price prior to the announcement of merger, rather than deal price minus synergies, as the fair value of what had been taken from stockholders as result of merger. After appropriately excluding synergies, the Supreme Court accepted Aruba’s calculation of its fair value at $19.10 per share—almost 23% less.