In re Appraisal of SWS Group, Inc., C.A. No. 10554-VCG

In a decision in the appraisal dispute over the fair value of SWS Group, the Delaware Chancery Court found in favor of Analysis Group client Hilltop Holdings Inc., which acquired bank holding company SWS Group on January 1, 2015 in a $350 million deal. After the acquisition, several shareholder groups petitioned the Chancery Court to determine the fair value of SWS Group, arguing that its stock should have been valued at $9.61 per share, nearly 40 percent higher than the deal price of $6.92.

An Analysis Group team including Managing Principal Gaurav Jetley and Principals Xinyu Ji and Chris Feige supported affiliate Peter Roth, who was retained as expert by Wachtell, Lipton, Rosen & Katz on behalf of Hilltop Holdings Inc. Mr. Roth, an investment banking expert specializing in the financial service sector, opined on the subscale nature of SWS Group's operations and the extent to which the acquisition was driven by the expectation of significant cost synergies. After a four-day trial, Vice Chancellor Sam Glasscock III determined SWS Group's fair value to be $6.38 per share, about eight percent lower than the deal price. In his ruling, Vice Chancellor Glasscock acknowledged the lack of scale of SWS Group's operations and opined that the appraised fair value being lower than the deal price is not surprising because "this was a synergies-driven transaction whereby the acquirer shared value arising from the merger with SWS."