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More on Delphi Financial Group

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I recently wrote about the very interesting opinion from Vice Chancellor Glasscock in the Delphi Financial Group litigation.  The crux of the opinion was the indication that the controlling stockholder (Robert Rosenkranz) was not entitled to a premium for his Class B shares relative to the publicly traded Class A shares (the respective merger prices for the two classes are $44.875 for the Class A and $53.875 for the Class B).

 Today, Delphi announced a settlement of the litigation (the merger, although overwhelmingly approved by Delphi’s stockholders, including the Class A, will not be consummated until final regulatory approval).  The announcement, at least read superficially, looks like a total victory for the plaintiff class:  there is to be a $49 million payment to the Class A (although plaintiffs’ attorney’s fees and costs will be subtracted from that payment, if the settlement is approved).  If one assumes that this entire sum will simply be reallocated from the Class B to the Class A, the result would be elimination of the Class B premium:  with about 6.1 million Class B shares outstanding, a $49 million reallocation would reduce the B shares’ consideration to $45.875 per share, and with about 49 million Class A shares outstanding, the merger consideration for the A shares would increase by $1 per share, to $45.875.  Voila!  All is even again.

 The question the press release doesn’t quite answer, however, is what the source of the $49 million settlement payment is.  If it’s Rosenkranz only, the “truing up” will have been accomplished.  To the extent, however, that the acquirer or some D&O insurance carrier is providing some portion of the $49 million, Rosenkranz would be retaining some of the premium that the Court criticized.   It will be interesting to learn a bit more about this settlement, and one hopes that the papers submitted in support of the settlement will clarify the source of the settlement payment.

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