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Cayman Court Relies on Market Value in Merger Appraisal

In a recent decision of the Financial Services Division of the Grand Court of the Cayman Islands, Qunar Cayman Islands Limited (10 May 2019) (“Qunar”), Parker J rejected the central hypothesis of the dissenting shareholders’ expert that there was a systematic undervaluation of Chinese companies on US exchanges which meant that their publicly traded share price was not a reliable indicator of the fair value of such companies. Having rejected this theory, he attributed a 50% weighting to the market value of the shares following the approach of the Company’s expert. Save in two minor respects, he also rejected the dissenting shareholders’ expert’s DCF calculation in excess of 4x the market price which was not credible unless there was a systematic undervaluation of Chinese companies on US exchanges.

Qunar is only the third1 reported merger appraisal case in the Cayman Islands, and is the first to be decided after the Court of Appeal’s decision in Shanda Games2 holding that the focus of attention in such cases should be on the value of the dissenters shares themselves, rather than on seeing the entitlement of the dissenting shareholders as being to a proportionate share in the value of the business as a going concern, as is the case in Delaware, and as had been accepted by the Court previously in Integra and in Shanda Games at first instance. Parker J expressly stated that “the exercise is to value the shares as at the valuation date.”3

 

To continue reading full articles in PDF format:
Cayman Court Relies on Market Value in Merger Appraisal

 



1 The others being Integra [2016] 1 CILR 192 and Shanda Games unrep. 25 April 2017
2[2018] 1 CILR 352
3Paragraph 52

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