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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 discussion draft, click here.

Forum Report: Fair Investor Access (Dell Valuation Project)

 

Plan for Support of Dell Appraisal Rights

Support services required for marketable investments in appraisal rights

Misleading reports about appraisal rights

Assuming that everyone has decided whether or not to reserve appraisal rights in relation to the proposed Dell buyout – and that if doing so has initiated the bureaucratic process for presenting a written demand in time – the highest priority for Forum attention now is to implement the support services that will be needed to make those rights practical for investors.

Plans for the organization of these services are summarized below. I want to thank all of you who have helped to guide us through the complications of marketplace and legal considerations to develop this very sound solution.

Support services required for marketable investments in appraisal rights

The Dell Valuation Trust has been organized to function exclusively as an independent manager of the services required to support appraisal rights established by Dell shareholders. Among other things, the Trust will not have any direct or indirect interest as a principal or agent in transactions of investments relating to appraisal rights. This carefully limited Trust responsibility for independent management has significant advantages for owners of the appraisal rights.

►    Owners can maintain complete control of their own decisions about buying or selling, borrowing or considering settlement proposals.

►    Owners can rely upon Trust support services to effectively manage their appraisal rights without potential biases or conflicts.

►    The Trust can function as a disinterested provider of information required for owner decisions.

On the subject of what services are needed and how they should be provided, our focus has been on these objectives:

1.      Effective services to achieve the highest possible value realization

2.      Economies from efficiently organized resources to serve multiple owners

3.      Owner access to decision-making information as well as exchanges of views

4.      Equal cost and benefit allocations to all appraisal rights managed by the Trust

A discussion draft of the Trust’s “Plan of Organization” has been posted on the Forum’s website for anyone who wants to review the current state of thinking, and we will welcome any questions or suggestions to guide our final definition of the plan by next week:

·         7/12/13 discussion draft: Dell Valuation Trust | Plan of Organization (4 pages, 208 KB, in PDF format)

As many of you know, we have already initiated the services supporting a shareholder’s perfection of appraisal rights and certifying eligibility for ongoing Trust support. If the Dell buyout is approved as expected next week, we will want to immediately implement the Review Panel to provide Trust supported shareholder-owners with the information they need to consider their choice between proceeding with appraisal rights or taking the $13.65 per share buyout bid.

Misleading reports about appraisal rights

The past week’s media focus on the views of Wall Street’s smartest (and richest) investor[1] generated a flood of uninformed, misinformed and confused views about appraisal rights. While the time for decision-making for most investors has passed since it is now too late to initiate a demand for appraisal, some of the issues raised may be relevant to future decisions about Dell as well as to your consideration of appraisal rights in other situations. We will try to address these issues during the next few weeks, and your advice of priorities for doing so will be appreciated.

Most disappointingly, one of the sources of confusion was last night’s press release of Dell’s special committee,[2] which included statements suggesting that auction bid prices are relevant to a court’s determination of fair value for appraisal rights and that each shareholder would have to “fund individually” its own appraisal process. I have encouraged the committee to correct these misimpressions.

GL – July 12, 2013

Gary Lutin

Chairman, The Shareholder Forum

575 Madison Avenue, New York, New York 10022

Tel: 212-605-0335

Email: gl@shareholderforum.com

 

 

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.