Athlon Sports Communications, Inc., is a private, closely held sports media company that has produced and distributed sports-related publications for decades. In the summer of 2012, its Board of Directors approved a merger from which four minority shareholders dissented, disputing the price at which the merger was approved. Waller represented Athlon in the dissenters’ rights suit that followed to obtain a judicial appraisal of the fair value of the dissenting shareholders’ shares in the company. The parties engaged in significant discovery on the company’s financial condition and engaged experts to opine on the fair value of the dissenters’ shares under the method prescribed by Tennessee law and alternate methods that have been utilized in other states.
The case was tried in late summer 2015, after which the trial court issued a 23-page ruling in Athlon’s favor, finding that the fair value of the dissenters’ shares was no more than the price at which Athlon’s Board of Directors approved the merger. To reach this conclusion, the trial court applied the Delaware Block method of valuation which uses a weighted average of the market value, asset value, and income value. The trial court rejected the valuations of the dissenters’ expert as unreliable and not in accordance with standards acceptable in the financial community.
On October 17, 2016, the Tennessee Court of Appeals affirmed the trial court’s ruling in favor of Athlon. Significantly, the Court of Appeals held that the trial court properly utilized the Delaware Block method and rejected the dissenters’ urging that it depart from that method and adopt more liberal methods of valuation that the dissenters argued were more appropriate to value Athlon. Instead, the Court of Appeals maintained the Delaware Block method as Tennessee’s default method to determine the fair value of a dissenting shareholder’s shares. Given the rarity of shareholder dissent cases and that the Delaware Block valuation methodology has been questioned or directly rejected by other jurisdictions (including Delaware), the Athlon case stands as important precedent likely to impact future shareholder dissent cases in Tennessee and fair value determinations.
To read the opinion of the Tennessee Court of Appeals, click here.