In the matter of Huff Fund Investment Partnership v. CKx, Inc., C.A. No. 6844-VCG, Petitioner, Huff Fund Investment Partnership (“Huff Fund”), instituted an appraisal action against Respondent, CKx, Inc. (“CKx”). In a decision issued on November 1, 2013, the Court of Chancery determined that the “best indicator of fair value of the Petitioner’s shares was the merger price generated by an arm’s length sales process.” Id. at *1. Thereafter, and in connection with a decision on Huff Fund’s Motion for Reargument, the Court permitted the parties to supplement the record with certain information regarding the merger price.
Due the ongoing nature of the proceedings, during which interest continued to accrue on the appraisal value, CKx filed a Motion to Stop the Accrual of Interest. The Motion sought an order requiring Huff Fund to accept an unconditional tender of $3.63 per share. The per share value offer was based upon CKx’s expert’s base scenario of value plus accrued interest. The Court succinctly explained, “In effect, [CKx] seeks the equitable analog offer-of-judgment rule, which allows Superior Court, but not Chancery litigants the ability to limit the adverse effects of a verdict.” Id. at *2.
Though the Court noted the potential utility of the approach proposed by CKx, it declined to grant the Motion. In reaching its conclusion, the Court was guided by Section 262(h) of Title 8 of the Delaware Code, which sets forth a formula for an award of interest. Section 262(h) provides in relevant part:
Unless the Court in its discretion determines otherwise for good cause shown, interest from the effective date of the merger through the date of payment of judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective date of the merger and the date of payment of the judgment.
After careful consideration of the statue, the Court concluded:
the discretion . . . to be exercised upon a finding of good cause, permits [the Court] to deviate from the statutory formula where a consideration of circumstances at the end of the process – of which a wide variety might be relevant – indicates that an award of the statutory rate would be unjust; but do not direct that respondents may avoid the running of interest by prepayment as a matter or right, which is ultimately, what the Respondent suggests here. While I am sympathetic to the incentives driving this Motion, ultimately I find the relief sought incompatible with the statute. Id. at *7.
The decision may be read in its entirety here.