Document: Krieger v. Wesco Financial Corp., C.A. No. 6176-VCL (Del. Ch. Oct. 13, 2011)
The Delaware Court of Chancery held that appraisal rights were not available in a stock/cash election merger because no stockholder was required to accept cash. In February 2011, Wesco Financial Corporation, a publicly traded corporation (“Wesco”), agreed to be acquired by Berkshire Hathaway. The terms of the merger agreement allowed for minority stockholders to have their shares converted into: (1) $385 per share in cash, (2) an equivalent value of publicly traded shares of Berkshire Class B stock, or (3) a combination of cash and publicly traded stock. Plaintiff, a Wesco stockholder, argued that the merger should trigger appraisal rights under Section 262 of the DGCL. The Court held that the Wesco stock fell within DGCL Section 262(b)(1)’s “market out exception” because the Berkshire Class B shares were listed on a national securities exchange. However, appraisal rights were not re-triggered by the “exception to the exception” in DGCL Section 262(b)(2) because, although the stockholders had the option to receive cash, they were not required to do so.