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.
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.
A copy of the letter that
had been made available to selected reporters the evening of May 9 was
publicly disclosed the next morning in the following SEC filing (2013-05-10
06:00:26) as its Exhibit 2 (PDF page 26):
The billionaire
Carl C. Icahn and Southeastern Asset Management, two of
Dell Inc.’s biggest shareholders, plan to bid for the struggling
computer maker, seeking to challenge a $24.4 billion takeover that they have
criticized as “the great giveaway.”
The effort by Mr. Icahn and Southeastern, disclosed
in a letter to Dell’s board Thursday night, is intended as a last-ditch
effort to fight the management buyout led by
Michael S. Dell, the company’s founder and chief executive, and the
private equity firm Silver Lake.
Unlike that bid, which would pay shareholders $13.65
a share in cash, Mr. Icahn and Southeastern are offering to pay shareholders
about $12 a share either in cash or in additional shares in the company. The
offer would still leave a portion of Dell publicly traded.
And if a special committee of Dell’s board refuses
to budge from Mr. Dell’s offer, the two investors have threatened to wage
war in the courts.
In the letter to Dell’s board, Mr. Icahn and
Southeastern savagely criticize the deliberations that led to Mr. Dell’s
offer, calling it inadequate and having the effect of shortchanging other
investors.
“We are often cynical about corporate boards, but
this board has brought that cynicism to new heights,” the letter said. “This
company has suffered long enough from very wrongheaded decisions made by the
board and its management.”
Together, Mr. Icahn and Southeastern owned more than
11 percent of Dell’s shares as of late March.
By offering to give shareholders a chance to remain
investors in Dell, the two shareholders argue that their bid is worth far
more than the current offer on the table. Both shareholders have
consistently argued that the company is poised for a rebound in its
fortunes, one that they fear would be enjoyed only by Mr. Dell and Silver
Lake if their bid were to succeed.
Yet Mr. Icahn and Southeastern’s position runs
counter to the apparent views of an investor consortium led by
the Blackstone Group, which withdrew from bidding for Dell last month
amid concerns that the computer maker’s business was deteriorating faster
and more badly than expected. Many investors had hoped that the
Blackstone-led group, which proposed paying more than $14.25 a share and
would have let investors keep a portion of their holdings, would have
succeeded in driving up the price of any deal.
After Blackstone walked away, Dell’s share price —
which had traded as high as $14.50 a share in anticipation of a bidding war
— tumbled below Mr. Dell’s offer. The company’s stock closed on Thursday at
$13.32.
Two months ago, Mr. Icahn outlined a potential offer
of about $15 a share for about 58 percent of the computer company, gaining a
24.1 percent stake.
To Mr. Icahn and Southeastern, one of the primary
attractions of Blackstone’s offer was that it would keep a portion of Dell
publicly traded, in what is known as a stub. Southeastern, the company’s
biggest shareholder outside of Mr. Dell himself, has argued loudly that
investors should be given the chance to share in what it expects is a
resurgence of the computer maker’s fortunes.
But advisers to a special committee of Dell
directors have argued that a transaction with a stub would seriously limit
the company’s financial flexibility, essentially piling on debt in full view
of public shareholders.
Critics of Southeastern have argued that the
investment firm is trying to make up for the high average price it paid in
amassing its Dell stake. (A person briefed on the matter has estimated that
the firm paid about $16.90 a share on average.)
In their letter Thursday night, both Mr. Icahn and
Southeastern argued that a number of shareholders already shared their view
that Mr. Dell’s offer was insufficient, and threatened a lengthy fight to
derail that bid. Such an effort would be likely to include both a challenge
in the courts and a potential campaign to oust members of the board.
“Either give shareholders the real choice they are
entitled to or face the legal liability for your failures,” the two
investors wrote.
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.
