Walkers advises on successful appeal of fair valuation determination Walkers successfully represented two dissenting shareholders, Maso Capital Investments Limited and Blackwell Partners LLC – Series A (the "Appellants"), in an appeal against a first instance judgment of the Grand Court of the Cayman Islands (the "Grand Court") in which the fair value of the Appellants' shares in Trina Solar Limited (the "Company") was determined pursuant to section 238 of the Companies Act (the "Judgment"). The determination followed the Appellants' dissent from a management 'take-private' transaction by which shareholders of the Company who were unaffiliated with the bidding consortium were offered US$11.60 per American Depositary Share ("ADS") as consideration for their ADSs.At first instance, the Grand Court Judge determined that the fair value of the Appellants' shares in the Company was US$11.75 per ADS using a blended basis of valuation methodologies, with a weighted average of 30% for the adjusted market (or trading) price, 45% for the deal (or merger) price and 25% for the Discounted Cast Flow ("DCF") valuation.On appeal, the Cayman Islands Court of Appeal (the "CICA") expressed considerable concern about the process undertaken by the Company to arrive at the offer made to shareholders by the bidding consortium. In this case, the lack of relevant witnesses (particularly as regards the special committee of the board of directors that was established to consider the offer made by the bidding consortium) or sufficient documentary evidence to explain and justify the deficiencies in the deal process was of particular concern to the CICA. In the circumstances of a management buyout, the CICA concluded that the absence of such evidence meant that the merger price could not be a reliable indicator of fair value. Accordingly, in addition to some amendments that needed to be made that will result in the DCF valuation being materially higher, the CICA concluded that the blended basis of valuation methodologies should be altered to give a weighted average of 30% for the adjusted market price and 70% for the DCF valuation (meaning that the merger price was given a zero weighting). Indeed the CICA commented that "in the present cast the Company escaped very lightly".The final calculation of the fair value of the Appellants' shares in the Company has been remitted to the Grand Court Judge for determination in accordance with the Judgment. In light of the amendments required by the CICA, it is anticipated that the adjusted fair value of the Appellants' shares in the Company will be substantially higher. The CICA's decision shines a light on the importance of companies ensuring that a robust and effective deal process has been implemented in management buyout scenarios, and how the merger price should be treated in future appraisal cases where the deal process is defective.The Walkers team is led by Partner Rupert Bell, with Associate Patrick McConvey. Simon Salzedo KC was instructed by the Appellants at both first instance and the appeal. Primary Contacts CAYMAN ISLANDSRupert BellPartnerT +1 345 914 4203rupert.bell@walkersglobal.comPatrick McConveyAssociateT +1 345 814 4583patrick.mcconvey@walkersglobal.com
