COURT OF CHANCERY
OF THE
STATE OF DELAWARE
JOHN W. NOBLE 417 SOUTH STATE STREET
VICE CHANCELLOR DOVER, DELAWARE 19901
TELEPHONE: (302) 739-4397
FACSIMILE: (302) 739-6179
November 28, 2014
Stephen P. Lamb, Esquire Kevin G. Abrams, Esquire
Paul, Weiss, Rifkind, Wharton Abrams & Bayliss LLP
& Garrison LLP 20 Montchanin Road, Suite 200
500 Delaware Avenue, Suite 200 Wilmington, DE 19807
Wilmington, DE 19801
Re: AM General Holdings LLC v. The Renco Group, Inc.
C.A. No. 7639-VCN
The Renco Group, Inc. v. MacAndrews AMG Holdings LLC
C.A. No. 7668-VCN
Dates Submitted: July 31, 2014 and November 21, 2014
Dear Counsel:
The Renco Group, Inc. (“Renco”) and MacAndrews AMG Holdings LLC
(“MacAndrews AMG”) debate the value of AM General Holdings LLC
(“Holdco”). They have reached an impasse in their efforts to agree upon the Third
Appraiser to determine the appraised value as provided in Section 15.12 of
Holdco’s Limited Liability Company Agreement (the “Holdco Agreement”).
AM General Holdings LLC v. The Renco Group, Inc.
C.A. No. 7639-VCN
The Renco Group, Inc. v. MacAndrews AMG Holdings LLC
C.A. No. 7668-VCN
November 28, 2014
Page 2
Selection of a valuation expert in this context is difficult for two principal
reasons. First, the valuation is challenging because Holdco involves an operating
company in the global defense industry. Second, because of the wide-ranging
activities of the parties and their affiliates, finding a qualified appraiser without any
conflicts presents an obstacle bordering on insurmountable.1 Conflicts, some more
significant than others, appear to have frustrated selection from among the larger,
nationally respected firms whose qualifications could not be otherwise debated.
Each side has proposed two appraisal firms. The Court will choose from
among them. Each firm undoubtedly has personnel qualified to perform the job.
The parties agreed to select a “firm,” not an individual. Perhaps the concern was
depth and breadth of experience or the extent of the resources that could be
assigned to the task. Yet, some of the “firms” seem essentially to be operations of
their individual leaders who are former heads of the valuation practice at “Big
1
The Court is designating a Qualified Appraiser as the Third Appraiser in
accordance with the Holdco Agreement. If the parties decide to reevaluate their
firm and, perhaps, unforgiving positions on conflicts, a change that I do not
anticipate, they are free to pursue that course and select a different Third Appraiser
based on agreement and a mutual understanding of its implications.
AM General Holdings LLC v. The Renco Group, Inc.
C.A. No. 7639-VCN
The Renco Group, Inc. v. MacAndrews AMG Holdings LLC
C.A. No. 7668-VCN
November 28, 2014
Page 3
Four” accounting firms. But, with the difficulties in avoiding conflicts generally,
retention of a smaller “firm” which may not have the “caliber” of larger, but
unavailable, firms seems unavoidable.
Valuation Research Corporation (“Valuation Research”), proposed by
MacAndrews AMG, subject to a conflicts check, appears to be the firm most
closely meeting the standards agreed to by the parties. It has eight offices in the
United States and has conducted valuations in the United States and international
business communities for more than three decades. For example, its international
experience includes valuing the Panama Canal with its power generation activities
and transmission lines, the water utility system, the lock system, and the railroad
assets.
An order designating Valuation Research will be entered.
***
In addition, MacAndrews AMG contends that Renco’s Alternate Appraisal’s
critique of its Initial Appraisal is beyond the scope allowed in the valuation
AM General Holdings LLC v. The Renco Group, Inc.
C.A. No. 7639-VCN
The Renco Group, Inc. v. MacAndrews AMG Holdings LLC
C.A. No. 7668-VCN
November 28, 2014
Page 4
provisions of the Holdco Agreement.2 Part of an appraiser’s (in this context,
essentially an “arbitrator’s”) function is determining what may properly be
considered (and the weight to be given to it). The risk that the Third Appraiser
would be misled or that MacAndrews AMG would be prejudiced appears minimal.
Thus, an order denying MacAndrews AMG’s motion to exclude or to redact
portions of Renco’s Alternate Appraisal will be entered.
Very truly yours,
/s/ John W. Noble
JWN/cap
cc: Thad J. Bracegirdle, Esquire
Joel E. Friedlander, Esquire
Register in Chancery-K
2
See MacAndrews AMG Hldgs. LLC’s Br. in Opp’n to The Renco Gp., Inc.’s
Appl. for Appt. of a Third [Appraiser] and in Supp. of its Cross-Mot. to Exclude
Inappropriate Material from the Alternate Appraisal at 13-15.