Tri-Continental Corporation v. Battye

Supreme Court of Delaware · 1950 · Corporations

74 A.2d 71 (1950)

Updated August 22, 2026

CorporationsAppraisal rightsMerger valuationappraisaldissenting stockholderintrinsic valuetrue valuegoing concern

Facts

Section 61 required payment to objecting stockholders of the value of their stock as of the merger date, excluding merger-related value. The corporation at issue, General, was a regulated closed-end investment company with leverage, whose common stockholders could not withdraw their proportionate share of assets and whose stock traded at a persistent discount to net asset value when in the relevant price range. The appraiser considered the nature of the enterprise, leverage, discount, asset value, management, earnings and dividends, expenses, portfolio holdings, and a favorable tax situation, and ultimately calculated a fair asset value of $5.44 and then applied a 25% discount to reach $4.08 per share. The Vice Chancellor instead treated fair asset value as if it should be separately weighted with a constructed market value and arrived at $4.62 per share.

Issue

How should "value" under Delaware's appraisal statute be determined for common stock of a regulated closed-end investment company with leverage? More specifically, may discount be applied as an independent element to fair asset value, or is discount relevant only to market value while net asset value must be separately weighted as an independent measure?

Rule

The appraisal statute requires payment of the stockholder's true or intrinsic value in his proportionate interest in a going concern. In determining that value, the appraiser and courts must consider all factors reasonably relevant to value, including market value, asset value, dividends, earnings prospects, the nature of the enterprise, and other facts known or ascertainable as of the merger date; no single factor such as market value or liquidating value may be used as the sole measure. For a regulated closed-end investment company with leverage, net asset value is essentially liquidating value and cannot alone determine going-concern value, while discount is an independent element of value that must be given effect because the stockholder's practical means of realizing value is sale at a discount when discount is operating.

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Lakefront Portfolio Fund, a Delaware regulated closed-end investment company based in Chicago, merges into another corporation. Dissenting shareholder Nina Patel seeks appraisal, and the record shows the company had a stable pre-merger market price, substantial portfolio assets, modest earnings, and a known tax-loss carryforward that could benefit common shareholders.

Which valuation approach most closely follows the governing appraisal rule?

Explanation. Appraisal requires the stockholder's true or intrinsic value in a going concern, excluding merger-generated value. The decision requires consideration of all reasonably relevant factors, not any single measure alone. Market value and asset value are pertinent, but neither alone controls, and merger expectancy must be excluded.