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The Shareholder Forumtm

special project of the public interest program for

Fair Investor Access

Supporting investor interests in

appraisal rights for intrinsic value realization

in the buyout of

Dell Inc.

For related issues, see programs for

Appraisal Rights Investments

Fair Investor Access

Project Status

Forum participants were encouraged to consider appraisal rights in June 2013 as a means of realizing the same long term intrinsic value that the company's founder and private equity partner sought in an opportunistic market-priced buyout, and legal research of court valuation standards was commissioned to support the required investment decisions.

The buyout transaction became effective on October 28, 2013 at an offer price of $13.75 per share, and the appraisal case was initiated on October 29, 2013, by the Forum's representative petitioner, Cavan Partners, LP. The Delaware Chancery Court issued its decision on May 31, 2016, establishing the intrinsic fair value of Dell shares at the effective date as $17.62 per share, approximately 28.1% more than the offer price, with definitive legal explanations confirming the foundations of Shareholder Forum support for appraisal rights.

Each of the Dell shareholders who chose to rely upon the Forum's support satisfied the procedural requirements to be eligible for payment of the $17.62 fair value, plus interest on that amount compounding since the effective date at 5% above the Federal Reserve discount rate.

Note: On December 14, 2017, the Delaware Supreme Court reversed and remanded the decision above, encouraging reliance upon market pricing of the transaction as a determination of "fair value." The Forum accordingly reported that it would resume support of marketplace processes instead of judicial appraisal for the realization of intrinsic value in opportunistically priced but carefully negotiated buyouts.

 

 

For a printable copy of this report, click here.

Forum Report: Fair Investor Access (Dell Valuation Project)

 

Panel to Consider Appraisal Rights Policies for Long Term Investment

The Forum’s attention to appraisal rights, initially in 2005[1] and especially in its current program for investor realization of fair value in the Dell buyout (and now also in the proposed Dole buyout), has been focused on providing the practical support required to make this alternative a marketable investment suitable for regulated fund managers. Having achieved this objective, we must also address very important policy issues that have been raised about how appraisal rights can be most effectively used to enhance long term investment interests.

The Review Panel being organized to guide the Forum’s program for Appraisal Rights Investments will be defining the issues that need to be considered by various decision-makers, then conducting an open exchange of views on those issues to provide a report of both consensus points and ranges of opinion. Lawrence A. Hamermesh[2] has agreed to serve as the program’s moderator, and Howard J. Bergman[3] will be serving as the Panel’s “reporter” responsible for meeting and reporting processes. Plans for the program, including a preliminary schedule and the initial Panel membership, will be reported in the next few weeks.

The issues are expected to be defined and considered as they apply specifically to three different types of decision-makers:

■ Value Investors – What is needed to make appraisal rights an efficiently managed, practical investment alternative for realization of intrinsic value?

■ Pension funds and indexed investors – What refinements of either appraisal rights processes or of portfolio administrative practices are needed to enable both enhanced index returns and support of commitments to long term investing?

■ Policy makers – Are any changes needed in laws or regulations to assure effective support of the public interest in capital allocations based on long term economic growth?

Your suggestions of questions to be considered, and who should be considering them, will be welcomed.

GL – October 14, 2013

Gary Lutin

Chairman, The Shareholder Forum

575 Madison Avenue, New York, New York 10022

Tel: 212-605-0335

Email: gl@shareholderforum.com

 

[2] Professor Hamermesh teaches corporate law at Widener Law School and is Director of the Widener Institute of Delaware Corporate and Business Law, and served during a 2010-2011 leave as senior special counsel in the SEC’s Office of Chief Counsel of the Division of Corporation Finance. He is considered a leading authority on appraisal rights, and his definitive papers on valuation standards have been cited in past Forum reports: 2009, Lawrence A. Hamermesh of Widener University and Michael Wachter of University of Pennsylvania: "Rationalizing Appraisal Standards in Compulsory Buyouts"; and 2005, Hamermesh and Wachter: "The Fair Value of Cornfields in Delaware Appraisal Laws"

[3] Mr. Bergman is a senior fellow with The Conference Board Governance Center, and has directed or counseled business-oriented programs at the University of Minnesota Law School’s Corporate Institute, The Sedona Conference, and George Mason University since his 2011 retirement from the General Counsel’s office of 3M.

 

 

This project was conducted as part of the Shareholder Forum's public interest  program for "Fair Investor Access," which is open free of charge to anyone concerned with investor interests in the development of marketplace standards for expanded access to information for securities valuation and shareholder voting decisions. As stated in the posted Conditions of Participation, the Forum's purpose is to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant is expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

The management of Dell Inc. declined the Forum's invitation to provide leadership of this project, but was encouraged to collaborate in its progress to assure cost-efficient, timely delivery of information relevant to investor decisions. As the project evolved, those information requirements were ultimately satisfied in the context of an appraisal proceeding.

Inquiries about this project and requests to be included in its distribution list may be addressed to dell@shareholderforum.com.

The information provided to Forum participants is intended for their private reference, and permission has not been granted for the republishing of any copyrighted material. The material presented on this web site is the responsibility of Gary Lutin, as chairman of the Shareholder Forum.

Shareholder Forum™ is a trademark owned by The Shareholder Forum, Inc., for the programs conducted since 1999 to support investor access to decision-making information. It should be noted that we have no responsibility for the services that Broadridge Financial Solutions, Inc., introduced for review in the Forum's 2010 "E-Meetings" program and has since been offering with the “Shareholder Forum” name, and we have asked Broadridge to use a different name that does not suggest our support or endorsement.