Another Vice Chancellor Considers Appraisal in Light of Dell and DFC and Another Appraisal Petitioner Gets Less than Deal Price: However, This Time, the Court of Chancery Relies on DCF Analysis and Not Deal Price or Market Price.

Sullivan & Cromwell LLP - March 1, 2018

The Delaware appraisal carousel continued with In re Appraisal of AOL Inc., where Vice Chancellor Glasscock had an opportunity to rethink the appraisal analysis in light of the Delaware Supreme Court’s decisions in Dell and DFC. In his decision, the Vice Chancellor did not rely on deal price in determining fair value because he had concerns that the AOL sale process was short of being what he called “Dell Compliant” -- sufficiently “unhindered, informed, and competitive.” The Vice Chancellor also did not choose AOL’s unaffected market price as the best evidence of fair value as Vice Chancellor Laster did in his recent decision in Verition Partners Master Fund Ltd. v. Aruba Networks, Inc., because neither party had argued that the market price was determinative or presented evidence as to the efficiency of the market for AOL’s shares. Instead, the Court examined the discounted cash flow (“DCF”) analysis presented by AOL of $44.85 per share, adjusted it upward to account for some analytical decisions made by AOL’s expert with which the Court did not agree, and concluded that the fair value of AOL at the time of the merger was $48.70 -- $1.30 per share less than the deal price of $50.