July 18, 2013 Forum Report: Winning the Opportunity to Realize Fair Value of Dell

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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, click here.

Forum Report: Fair Investor Access (Dell Valuation Project)

Winning the Opportunity to Realize Fair Value of Dell

This morning it appears that the interests of investors who want to realize the fair value of Dell – both the buyout group and those of you who reserved appraisal rights – will depend on support for the proposed transaction from a few more votes at an adjourned July 24 meeting.

Some of these votes are likely to come from investors who may have developed unrealistic expectations of short-term negotiating opportunities in the reservation of appraisal rights. While the reported “no-brainer” 60 day option provisions of appraisal rights are generally accurate,[1] the suggested use of these provisions to negotiate a bump in deal terms is at best an untested theory. If your only objective in reserving appraisal rights was to negotiate a revised proposal, you may want to reconsider your position.

Participants in the Dell Valuation Trust[2] are encouraged to ask me, either directly or through your delegated Review Panel member, about any issues that concern you, including the various rumors as well as suggestions that larger holders terminate a portion of currently reserved appraisal rights to support the transaction.

However the Dell situation develops, we will of course want to make good use of the lessons that have been learned about the value of rational marketplace decisions. New situations we have been asked to consider for similar support of appraisal rights will be addressed accordingly.

GL – July 18, 2013

Gary Lutin

Chairman, The Shareholder Forum

575 Madison Avenue, New York, New York 10022

Tel: 212-605-0335

Email: gl@shareholderforum.com

[1] See July 10, 2013 Wall Street Journal: "Icahn Calls on Dell Holders to Seek Appraisal of Shares."

[2] For a summary of requirements to participate, see the July 12, 2013 Forum Report: Plan for Support of Dell Appraisal Rights.

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.