In re Appraisal of PetSmart Inc., C.A. No. 10782-VCS (May 26, 2017)

The Court of Chancery continues to wrestle with the issue of when the negotiated deal price represents "fair value" in an appraisal case. Here, serious problems with the management projections led the Court to reject a discounted cash flow valuation based on those forecasts. Instead, after finding the deal price was the product of a process reasonably designed and appropriately implemented to achieve a fair value, the Court accepted it as fair value. While it is unusual for the Court to find management was too optimistic about their company's future, this decision is not unique in expressing a preference for the product of real-world negotiations between sophisticated parties. Deal prices will continue to heavily influence appraisal valuations when the evidence shows "the price is right.”