Linklaters U.S. Dispute Resolution Team Secures Trial Victory for Sibanye Gold Ltd. in Delaware Appraisal Proceeding Resulting From $2.2bn Acquisition of Stillwater Mining Co.

Linklaters U.S. trial lawyers have won a significant victory for Sibanye Gold Ltd. (“Sibanye”), which acquired Stillwater Mining Co. (“Stillwater”) in May 2017 for $18 per share.  Following the acquisition, several Stillwater shareholders filed an appraisal petition with the Delaware Chancery Court, arguing that Stillwater’s fair value was in fact $25.91 per share, based on a discounted cash flow (“DCF”) analysis prepared by their expert witness.   Following a trial and extensive post-trial briefing, the court rejected the petitioners’ claims and found instead that the deal price of $18/share was the best indicator of fair value.

In reaching this finding, the court assessed three principal metrics: (1) the deal price, (2) the adjusted trading price of Stillwater’s stock, and (3) the parties’ respective DCF analyses.  Following a bench trial in Delaware in December 2018, the court found that the most persuasive measure of fair value was the deal price of $18/share, concluding that Sibanye proved that the sale process made the deal price a reliable indicator of fair value.  This is a significant victory, and an important decision because it provides critical guidance to companies concerning when their sale processes will be deemed sufficiently reliable to make the deal price an appropriate indicator of value.   

The Linklaters team included partners James Warnot, Adam Lurie and Brenda DiLuigi, senior US associates Nicole Jerry and Elizabeth Raulston, and US associates Menaka Nayar, Sean Mooney, Michael Pilcher, Ellen Gong, Somin Lee, and Charlene Warner.

The right of a target company’s shareholders to file an appraisal petition is a powerful tool held by shareholders of Delaware corporations, not least because they are statutorily entitled to receive interest of 5% above the rate set by the Federal Reserve on whatever fair value is determined to be.  Accordingly, a considerable number of similar cases have been filed – usually by hedge funds with “appraisal arbitrage” practices – and have gone to trial in the US in recent years.  As a result, this area of the law is developing very quickly, and many decisions have held – like ours – that the deal price is the best indicator of fair value.  The decision is thus likely to help shape future decisions in this area of the law. 

The case is In re Appraisal of Stillwater Mining Company, Consol. C.A. No. 2017-0385-JTL.