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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 Dell's response to the letter below, and to the Forum's supplemental demand letter, see

 

For a printable copy of this report with a copy of the letter as transmitted, click here.

Forum Report: Fair Investor Access (Dell Valuation Project)

 

Encouraging Dell’s Voluntary Compliance with Investor Rights to Information

The letter copied below is being sent to Dell in response to their previously reported “four lawyer letter,”[1] encouraging their voluntary compliance with the company’s obligations to provide its shareholders with same information that was made available to the advisors they engaged to provide valuations supporting their proposed buyout transaction.[2]

It should be noted that it is fairly common for a company’s management to state objections to shareholder demands for information, at least as an initial position, but that the nature and vigor of Dell’s response is unusual. Particularly, their lawyer’s professed confusion about the administrative details of the “Delegate” authorization form seems especially extreme since the Forum has been using the same form for several years without any questions being raised, even by companies that fought compliance,[3] and it is in any event something that could be easily resolved with some good faith suggestions of modified statements.

In the context of Forum experience with demands for records as a means of supporting investor access to information,[4] I am confident that we will ultimately be able to provide public investors with the ability to make informed decisions about the transaction proposed by Dell’s management.

GL – March 11, 2013

Gary Lutin

Chairman, The Shareholder Forum

575 Madison Avenue, New York, New York 10022

Tel: 212-605-0335

Email: gl@shareholderforum.com

[3] For an example of a company that resisted compliance but accepted the same form of “Delegate” authorization, see a 2005 Forum report of a demand for records of CA Inc. (f/k/a Computer Associates).

[4] For a 2001 article addressing Forum support of investor information access during the dot-com bubble, see April 29, 2001 New York Times: "Holding Executives Answerable to Owners."

 

 

For a copy of the letter as transmitted, click here.

  [letterhead of The Shareholder Forum]

 

March 13, 2013

 

By email and postal service

 

Ms. Janet B. Wright

Vice President – Corporate, Securities & Finance Counsel

Dell Inc.

One Dell Way, RR1-33

Round Rock, Texas  78682

 

Re:       Demands for records

 

Dear Ms. Wright:

Responding to the letter you sent me last night shortly after its SEC filing, I will welcome informal discussions with you or any of your lawyers to clarify the demand for records so that we can proceed with a timely review of information that investors will need to consider the proposal presented by Dell’s management.

It is suggested that we consider the issues you raised in three categories:

  1. Administrative: Although we have been using the same form of “Delegate” authorization for several years without any questions about its compatibility with the provisions of Section 220 that accommodate the use of lawyers, accountants, financial advisors and other professionals as agents for authorizing stockholders, I will be glad to consider your suggested refinements of any phrases you find confusing. It should be clear from the statements in the power of attorney as well as in my letter that the purpose of this process is for the Forum to report only non-confidential information for stockholder consideration, so that the stockholder can use the information to make investment decisions.
  2. Purposes of demand: Not being a lawyer, I cannot address the applicability of the cases you cite but am confident that the purposes of the demand would be considered perfectly consistent with the plain language of Section 220:

A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder.

The demand is simply for the same information that Dell provided for its own valuation experts, and those engaged by the special committee. If information was relevant to those experts’ considerations of value, it must also be relevant to the considerations of a stockholder, especially if the stockholder is presented with a proposal based on the advice those experts provided to the proponents.

  1. Distinguishing board responsibilities from investor responsibilities: It should be understood, once and for all, that the Forum is not addressing the conduct of the board or its special committee, and that your defense of the special committee’s performance is neither appropriate nor relevant. What concerns us is the need for each of Dell’s stockholders to make its own independent decisions about its own individual interest, and that is not something that board members can or should be doing for them.

Addressing your purpose, if it is to serve Dell’s stockholders I am confident we will be able to resolve any confusion about the process for providing the information they need to fairly consider the proposed transaction. Please let me know by the end of this week how you wish to proceed.

Sincerely yours,

/s

Gary Lutin

 

cc:        S. Mark Hurd, Esquire

William D. Regner, Esquire

Gregory P. Williams, Esquire

 

 

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.