The recent decision of In re Appraisal of AOL Inc., C.A. No. 11204-VCG (Del. Ch. Feb. 23, 2018) constitutes yet another Delaware Court of Chancery appraisal decision in which fair value of the corporation fell below the deal price of the merger. Petitioners beware.
Here, the Court relied solely on its own discounted cash flow (“DCF”) analysis to appraise the fair value of AOL Inc. This resulted in fair value below the deal price paid in its acquisition by Verizon Communications Inc.
Vice Chancellor Glasscock did indicate that deal price is the best evidence of fair value when appraising “Dell‑compliant” transactions, where “(i) information was sufficiently disseminated to potential bidders, so that (ii) an informed sale could take place, (iii) without undue impediments imposed by the deal structure itself.” (Slip op., at 20).
However, the Court held this was not such a transaction. The Court found that certain of the deal protections, combined with informational disparities between potential bidders, and actions of the parties were preclusive to other bidders. Thus, Vice Chancellor Glasscock assigned no weight to the deal price in the Court’s fair value determination. Applying its own DCF analysis, the Court ultimately determined fair value to be approximately 3% lower than the deal price.