Jul 21, 2014, 10:32am CDT

Dell shareholders push back in buyout share price appraisal case

	Nick Simonite/ABJ Michael Dell speaks to attendees at the Dell World 2013 conference at the Austin Convention Center.

A shareholder advocacy group is asking Dell Inc. to withdraw a long list of demands for documentation that they allege could bog down a requested appraisal on the company buyout share price.

The New York-based Shareholder Forum requested that Dell's attorneys withdraw the court filing request for additional documentation, according to a July 14 letter. A minority of more than 100 Dell shareholders are exercising their right for an appraisal rather than accepting the $13.75 share price that CEO Michael Dell and his investor group paid other shareholders during the October 2013 buyout that took the company private.

The process is being managed by J. Travis Laster, a vice chancellor in the Delaware Chancery Court, the New York Times reported Saturday.

Earlier this month, Dell’s lawyers requested from the minority shareholders a massive amount of records covering more than a three-year period — from January 2011 through May. But the Shareholder Forum, an independent moderator founded in 1999 by the New York Society of Security Analysts, has asked Michael Dell to request that his lawyers withdraw the document request.

“I’ve asked Michael Dell to assume responsibility for his company’s respect of investor rights,” Shareholder Forum Chairman Gary Lutin, a former investment banker, said in an interview with Austin Business Journal. “This appears to be intended to impose burdens that would be very significant to a professionally managed fund, which would discourage such shareholders to volunteer themselves as fiduciaries in an appraisal process.”

In response, Dell spokesman David Frink said Sunday that “Dell has served requests for documents on the named plaintiffs that filed suit against Dell. Discovery of this nature is usual in appraisal cases such as this one. Beyond this, we do not intend to comment on the pending litigation.”

Petitioners in the case include Baltimore-based T. Rowe Price Group Inc. (Nasdaq: TROW), once Dell's third-largest shareholder.

Michael Dell initiated the $24.9 billion buyout in February 2013. But he quickly ran into opposition when activist investor Carl Icahn joined forces with another buyout firm, Southeastern Asset Management Inc., in buying up Dell stock and claiming the initial amount offered by Michael Dell, $13.65 per share, undervalued the company. He subsequently upped his offer.

After a large number of shareholders abstained from voting on the buyout, Michael Dell requested the rules be changed so non-votes would not be counted in the final tally instead of counting towards a rejection of his offer.

Andrew Whinston, a University of Texas professor in the Department of Information, Risk, and Operations Management, said it’s likely that Michael Dell will at some point launch an initial public offering again at a higher valuation, creating a windfall for himself and investor Silver Lake Partners.

“That’s his [eventual] goal, to go public at $24 [per share] or $25,” Whinston said. “It’s a big financial gamble.”