Proposed changes to the Delaware appraisal statute have cleared Delaware’s House of Representatives without dissent, and now move on to the state Senate. The new legislation, which we blogged about in March, sets a floor for the number of shares and value of suit necessary to bring an appraisal action. It also permits M&A targets to prepay merger consideration to dissenting shareholders to avoid interest accruing on the prepaid amounts. We note that the target’s ability to prepay some or all of the merger consideration could have the unintended effect of increasing the number of appraisal filings by ameliorating an investor’s illiquidity problem in prosecuting an appraisal action. Investors may now be enabled to redeploy their otherwise trapped capital in a new appraisal case; while investors would obviously lose their statutory interest on the prepaid amount, that might be a trade-off they can live with.
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