Norwitz wrote in a blog post that the bar's proposals do not go far enough to discourage the hedge funds. As he sees it, there is a danger that the buyers of companies will pay less to all shareholders because they will have to find the funds to pay off the hedge funds, who he referred to as "hold-up artists."
The Delaware bar committee that drafted the appraisal proposal said in an explanatory paper that buyers can negotiate conditions that would allow them to back out if a certain number of appraisals are filed. The bar also said corporate deals involving proper steps, such as testing the deal's price by seeking other potential buyers, are less likely to be the subject of appraisals.
In the PetSmart case, the funds asked the court to determine the fair value of their stock and award them their costs associated with the suit.
In a class action over the same deal, which was approved by about 75 percent of PetSmart shareholders, investors have said PetSmart was worth more than $100 per share. At that price, the BC Partners consortium could easily be on the hook for more than $200 million in payments to the hedge funds, including interest.
A PetSmart spokesman declined to comment as did a lawyer for the funds in the case.