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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.

 

Forum distribution:

Professional views of reported vote in favor of transaction by petitioner for "dissenter" rights to appraisal

 

For Dell's presentation legal principles and facts supporting dismissal of appraisal rights in relation to the shares that T Rowe Price had voted in favor of the Dell buyout transaction, see

 

Source: Lowenstein Sandler | Appraisal Rights Litigation Blog, May 13, 2015 posting

Lowenstein

Sandler

About This Blog

This forum provides insights and analysis of recent developments in appraisal rights litigation, educating professional investors about an underutilized but highly effective mechanism to increase their returns in M&A deals.

 

Table Is Set in Dell Case for Another Look at Arbitrage

By Steven M. Hecht on May 13th, 2015

On Monday the Delaware Chancery Court heard challenges by Dell to the entitlement of various dissenting shareholders to pursue their appraisal claims.  Dell’s challenges included failures by shareholders to timely and accurately assert their appraisal rights, and a lack of continuous ownership of Dell stock based on purported changes in the nominal ownership of such stock.  The court has yet to rule on these arguments.  But perhaps the most closely watched challenge was the one not heard yesterday: namely, Dell’s challenge to T. Rowe Price’s appraisal claim based on the apparently recent revelation that T. Rowe voted “for” the merger, as we previously posted.  The court indicated that it would take up that issue after Dell proceeds with the targeted discovery that it advised the court it intends to pursue in respect of T. Rowe’s vote.

Also in the course of that hearing, Vice Chancellor Laster heard argument from an individual dissenting shareholder defending his entitlement to proceed and invoking historical case law to support his position.  As an amusing aside, the chancery judge commented that he appreciated hearing citations to court cases going back more than 10 years, validating the fact that appraisal rights are an historical phenomenon dating back to Delaware’s corporations law from the 19th century and were not simply invented in 2007 — when the Transkaryotic case was decided — as some people, particularly in New York, seem to believe.  This was a not-so-subtle swipe at the critics of appraisal arbitrage, who have derided the Delaware courts, and more recently the Delaware state assembly, for failing to limit or eliminate the emerging practice of appraisal arbitrage, as we have repeatedly posted about in recent months.

Based on this Reuters piece summarizing the May 11 hearing and Dell’s brewing challenging to T. Rowe’s ability to proceed, it appears that T. Rowe may try to justify its entitlement to proceed by invoking the arbitrage cases to suggest that there were enough appraisal-eligible shares to allow it proceed, although it clearly faces an uphill battle.  Ordinarily, if a shareholder votes “for” the transaction, it’s game over for its appraisal claim.

 

Copyright © 2015, Lowenstein Sandler LLP. All Rights Reserved.

 

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.