A post from Tyler O'Connell of MorrisJames informs us that:
In In re USG Corp. S’holder Litig., 2020 WL 5126671 (Del. Ch. Aug. 31, 2020), the Court of Chancery granted the director-defendants’ motions to dismiss post-closing money damages claims arising out of the sale of USG Corporation (“USG”) for less than what USG’s directors allegedly thought was its intrinsic value. Although the failure to disclose such “intrinsic value” prevented dismissal under Corwin v. KKR Financial Holdings, LLC, 125 A.3d 304 (Del. 2015), Vice Chancellor Sam Glasscock III held that, in the circumstances, that omission and the directors’ approval of the sale did not suffice to plead a breach of the directors’ fiduciary duty of loyalty. ...
The Court reasoned that, as recent Delaware appraisal cases have suggested, “intrinsic value” or “fair value” are “nebulous, even illusory, concepts.” With a “but see” cite to Delaware’s appraisal statute, the Court reasoned that “[b]elief in any particular intrinsic value, by any being less than an omniscient god, is necessarily a belief that is subjective in nature.” The Court held, however, that “because the Proxy Statement disclosed that the Board held a view of intrinsic value and frequently referenced such a view during its disclosures about the sales process, USG’s stockholders were entitled to know the Board’s opinion of USG’s intrinsic value, even if it was unachievable due to market forces and Knauf’s threats to launch a hostile takeover.”
An asset (including a business) has no intrinsic value, of course. Instead, it is worth only what the buyer with the highest reservation price is willing to pay. The Delaware courts have recognized this. But the USG board apparently doesn't understand basic finance and they paid the price for being that dumb.
