Hedge funds lose court bid over
Ancestry.com deal price
BY TOM HALS
| Fri Jan 30, 2015 6:49pm EST
- Hedge funds lost a court bid to get extra cash for their shares of
online family research site Ancestry.com Inc, in a ruling involving an
increasingly popular hedge fund strategy.
judge ruled on Friday that a private equity firm paid a fair value of
$32 per share in 2012 to acquire Ancestry.com and rejected hedge fund
claims the price should have been as high as $47 per share.
involves "appraisal arbitrage" in which investors vote against a
proposed deal and then ask a judge to determine the fair value of the
stock after a trial.
Ancestry.com was sold to European
private equity firm Permira Advisers. The private equity firm paid 40
percent above the market price for the stock, according to the 56-page
opinion from Sam Glasscock, a judge on Delaware's Court of Chancery.
deal closed, Merion Capital, Merlin Partners and Ancora Merger
Arbitrage Fund exercised appraisal rights and sought a better price
for their 1.4 million shares. Their expert argued for between $42.81
and $47 per share, while Ancestry.com's expert put the fair price at
$30.63 per share, according to the opinion.
who specializes in appraisals said he would not be deterred from
bringing the cases because, while Glasscock arrived at the merger
price, he made a detailed analysis of the presentations from both
"I’m not at
all thinking less of bringing claim because of this decision," said
Steven Hecht, of Lowenstein Sandler.
said reviewing both detailed financial analyses was like "eating
chicken gizzards: plenty of chewing but mighty little swallowing."
month, Glasscock issued a ruling that would make it easier for funds
to pursue appraisal arbitrage cases.
founded by securities class action lawyer Andrew Barroway, has been a
leader in bringing appraisal arbitrage cases, which can take years to
investors failed to increase the amount, the judge also declined to
find fair value below the deal price. The funds will also collect
interest, limiting their potential losses.
appraisal arbitrage strategy has produced big returns. In 2012,
Orchard Enterprises Inc was ordered to pay Merlin Partners and others
$4.67 per share for their stake in the company, more than twice the
$2.05 per share merger price.
Ancestry.com declined to comment.
Attorneys for the investors did not immediately respond to a request
(Editing by Matthew Lewis. Editing by Andre Grenon)