An Alberta court has dismissed claims led by an American hedge fund that the Canadian subsidiary of French multinational Total S.A. offered far less than fair value to shareholders dissenting from an amalgamation which formed the second stage of its 2005 acquisition of Deer Creek Energy Limited.

In a detailed 132-page judgment released on June 13, 2008, Madam Justice Barbara Romaine of the Alberta Court of Queen's Bench found that the fair value of Deer Creek's shares was $31 at the relevant Valuation Date. She dismissed claims put forward by Paulson & Co. Inc. and a number of other smaller shareholders that the shares were worth between $110 and $200 per share. Given the number of shares in respect of which dissents were registered, the amounts claimed in excess of that offered by Deer Creek ranged from roughly $675 million to nearly $1.5 billion.

The litigation arose in the wake of an August, 2005 takeover bid of $25 per share by Total E&P Canada Ltd. for Deer Creek, an early stage oil sands company. The bid was increased in September to $31 per share to match a competing bid. Of Deer Creek's outstanding shares at the date of the takeover bid, 82.4% were tendered to the Total bid. However, Paulson began accumulating shares in the market upon the announcement of the offer and ultimately acquired nearly 8.5 million shares, roughly a 16% interest.

When Total proceeded with a second-stage amalgamation to complete its acquisition of 100% of Deer Creek's shares, it offered the other shareholders the same $31 per share at which the takeover bid had cleared the market. Paulson and a small number of individual shareholders decided to dissent and to assert that they were entitled to far in excess of $31 as the fair value of Deer Creek's shares.

Macleod Dixon LLP commenced proceedings in early 2006 on behalf of Deer Creek to determine the fair value of its shares. Through the co-operation of all parties the case proceeded on an expedited basis to a four-week trial in mid-September of the same year. Extensive written arguments were submitted in December and January, 2007, with oral argument following on February 16, 2007.

The decision provides guidance on a number of issues relating to the determination of fair value in dissenting shareholder proceedings, particularly in the context of second-stage transactions typically utilized to complete the intended acquisition of 100% of the shares of the takeover target.

Paulson and Co. was represented by Frank Foran Q.C., Randall Block Q.C. and Jennifer Faircloth of the Calgary office of Borden Ladner Gervais LLP.

The dissenting shareholders are appealing the decision to the Alberta Court of Appeal, with a hearing scheduled for April of 2009.