WALL STREET JOURNAL.
Some AOL Shareholders Plan to Seek Higher Payout on Verizon Deal
$4.4 billion sale to Verizon Communications closed Tuesday
Some AOL investors
didn’t sell their stock to Verizon and instead plan to seek a
higher price in court. PHOTO: ANDREW GOMBERT/EUROPEAN
June 26, 2015 2:42 p.m. ET
Some AOL Inc. shareholders want more than
the $50 a share
Verizon Communications Inc.
paid to take the iconic Web company
private earlier this week.
Investors owning at least
about 4 million shares, or 5% of AOL, didn’t sell their stock to
Verizon and instead told the company they plan to seek a higher price
in court, through a legal process known as appraisal, according to
people familiar with the matter.
The dissenting funds
include Brigade Capital Management LP and Verition Fund Management
LLC, some of the people said. Brigade filed a notice with the Delaware
Court of Chancery that it plans to seek an appraisal for about 1
The funds have a few
months to abandon the appraisal plans and accept the deal price.
The $4.4 billion deal
closed Tuesday. About 60% of AOL shares were tendered into Verizon’s
offer, according to a securities filing, a low number for an
uncontested merger. The stock had consistently traded above the deal
price in recent weeks, likely on hedge funds buying shares to preserve
their appraisal rights. An AOL spokesman declined to comment.
Appraisals, in which
investors ask a judge to award a higher price for their shares, have
gone from a little-used remedy for slighted shareholders to a bona
fide investing strategy. A record 40 such cases were brought last
year, and another 28 have been filed already this year representing
claims with a face value of about $1.8 billion, according to a review
of court filings.
Retailer PetSmart Inc.,
fruit grower Dole Food Co. and jewelry-store chain Zale Corp. all have
multimillion-dollar appraisal actions pending from recent buyouts.
The AOL-Verizon deal is an
unusual target, though. Most appraisals have focused on buyouts by
private-equity firms, particularly those involving management, where
they say asymmetrical information and big insider stakes can skew
deals in favor of a single, preferred bidder. Arm's-length sales to
corporate buyers are less often challenged.
The investors don’t yet
have to say how much they think their AOL shares are worth. Analyses
by AOL’s bankers at Allen & Co. suggested a range of $42.92 to $58.82,
using a variety of metrics.
Liz Hoffman at