July 2, 2015 Forum Report: Delays in Management of Dell Appraisal Case

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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: Dell Appraisal Rights

Delays in Management of Dell Appraisal Case

Plans reported a month ago for progressing with the Dell appraisal case[1] have been delayed, but we have established a sound foundation for collaboration among the non-conflicted petitioners and there is a reasonably good chance that the case can be resolved without an extension of the court’s schedule for hearing valuation arguments in October.

The delay relates to our review of information relating to valuation that has been developed during the past few months of investigation by Grant & Eisenhofer, which had been appointed lead counsel in the case before it was discovered that the firm’s petitioner clients managed by T. Rowe Price had reportedly voted their shares in favor of the Dell buyout. It is necessary for the other petitioners and their attorneys to become familiar with the valuation information, since it has become increasingly clear that Grant & Eisenhofer’s duties to its clients in defending the eligibility of their appraisal claims will make it impractical for them to also represent the interests of the other claimants in their undisputed rights to appraisal.[2] Unfortunately, Grant & Eisenhofer has not responded to repeated requests for cooperative communication, so that we will now have to rely upon more formal processes to require their compliance with the provisions of the court order obligating lead counsel to provide this information to all petitioners.[3]

More positively, the Forum has agreed to work with legal counsel for all the other petitioners to provide reporting of non-confidential information to any Dell claimants or representatives who ask to be included in the Forum distributions. This will include regular quarterly progress reports and news of any major developments, as well as responses to participant questions or information requests. Although this kind of reporting is unusual for litigation cases, we and the attorneys representing other petitioners believe that this process for keeping investors informed and hearing their views will benefit both claimants and those who are responsible for their interests.

I will continue to welcome your questions and suggestions, and look forward to reporting what is established during the next few weeks to assure efficient progress of the case.

GL – July 2, 2015

Gary Lutin

Chairman, The Shareholder Forum

575 Madison Avenue, New York, New York 10022

Tel: 212-605-0335

Email: gl@shareholderforum.com

[1] See May 26, 2015 Forum Report: Inviting Suggestions for Effective Management of Dell Appraisal Case.

[2] These concerns became more serious when a T. Rowe Price response to discovery demands admitted that they had known about the “discrepancy” in their voting at least since October 2014, when the Proxy Insight research service sent a written request for confirmation of the seemingly inconsistent T Rowe Price SEC filings showing votes in favor of the Dell merger, and that neither T. Rowe Price nor their counsel had taken any action to voluntarily correct their signed and verified petition statements that “Petitioners have not voted in favor of the Transaction” on which the court based its appointment of lead counsel; see the response to Interrogatory No. 10 on pages 18-20 of the publicly filed June 15, 2015, In Re: Appraisal of Dell, Inc. (Consol. C. A. No. 9322-VCL): Objections and Responses of T. Rowe Price and the T. Rowe Price Petitioners to Respondent's Second Set of Interrogatories Directed to Certain Petitioners on Issues Relating to Entitlement to the Statutory Appraisal Remedy, with attached Verification affidavit of Donna Anderson, Vice President of T. Rowe Price Group, Inc.; for an example of counsel’s uncorrected statement about voting, verified by the petitioner’s affidavit, see paragraph 10 of February 6, 2014, T. Rowe Price Equity Income Fund, Inc., et al, Petitioners, v. Dell, Inc., Respondent (Delaware Chancery Court, Case No 9322): Verified Petition for Appraisal of Stock.

[3] See paragraphs 7-9 of the April 10, 2014, In Re: Appraisal of Dell, Inc. (Consol. C. A. No. 9322-VCL): Consolidation Order.

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.