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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 with its referenced letters, click here.

Forum Report: Fair Investor Access (Dell Valuation Project)

 

Simplified Demand to Dell for Timely Access to Information

Dell’s legal officer sent a very short, six-line letter last night rejecting my suggested collaborative discussions to establish efficient processes for responding to information requirements. The letter stated only that the company will continue to rely upon her previously stated views of legal “deficiencies” in my demand for records, without explaining which of the old arguments might remain relevant after the board’s special committee declined to accept the unusual fiduciary duties on which the argued legal theories had been based.[*]

Rather than wait for a court to explain the company’s obligations to answer legitimate investor questions, I have started over with a new, simplified demand that should eliminate the need to address any of the previously argued legal views. This new demand is for only transcripts and other records of the speech that Michael Dell reportedly made at the annual meeting of Silver Lake investors last month, as publicly reported in an article to Forum participants titled “Dell in Rare Feat as PC Speech Gets Investor Cheers.” The required statement of purpose in the new demand is as follows:

The stockholder’s purpose is to obtain information for which investment relevance has been indisputably established, so that the stockholder can reasonably consider (a) the Company’s valuation, (b) whether to vote in support of the Company’s buyout proposal, and (c) whether to elect the alternative of appraisal rights to receive fair value instead of the Company’s proposed buyout price. Put simply, the stockholder needs to understand why the Company’s chief executive officer and Silver Lake, the two leading principals of the proposed buyout, clearly believe that the Company is worth more than the $13.65 price they have offered to pay.

Copies of both letters have been posted on the Forum website:

It is assumed that Dell’s lawyers will not have any legitimate arguments to delay a response to this very simple demand, so that we should be able to establish an understanding for responding to investor information requirements before shareholders have to make decisions about the company’s proposed buyout.

Please let me know what questions you have about this process, and any suggestions you can offer to support timely investor access to decision-making information.

GL – May 17, 2013

Gary Lutin

Chairman, The Shareholder Forum

575 Madison Avenue, New York, New York 10022

Tel: 212-605-0335

Email: gl@shareholderforum.com


 

[*] For the special committee’s decisions to adhere to conventional understandings of director duties, see April 15, 2013 Forum Report: Dell Board Supports Investor Rights to Ask Questions and May 8, 2013 Forum Report: Proceeding with Dell Investor Information Requirements; for links to the legal officer’s referenced three letters presenting 11 pages of argued “deficiencies,” see April 3, 2013 Forum Report: Do Dell Directors Want Responsibility for Investor Decisions?.

 

 

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.