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.
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.
Carl
Icahn has suggested a so-called leveraged recapitalization of Dell
Dell Inc. has agreed to open its books to the
activist investor Carl C. Icahn, signaling a possible truce on one front in
the battle over the computer maker’s proposed $24.4 billion buyout.
In exchange, the billionaire — who was critical of
the deal just last week — has agreed to confidentiality, which silences,
temporarily at least, the influential investor.
In a brief statement on Monday, Mr. Icahn’s firm
said that it “looks forward to commencing its review of Dell’s confidential
information.”
By signing the agreement, Mr. Icahn will formally
participate in a “go-shop” process being run by a special committee of
Dell’s board. It is meant to flush out offers that could potentially top the
$13.65-a-share bid made by the company’s founder,
Michael S. Dell, and the investment firm Silver Lake.
Last week, Mr. Icahn appeared poised to join a
chorus of opposition to the leveraged buyout proposal. That group already
includes two of Dell’s biggest outside shareholders, Southeastern Asset
Management and
T. Rowe Price. Southeastern and Mr. Icahn have been on the same side in
a battle before: Both agitated for change at
Chesapeake Energy, and the two eventually won seats on the oil driller’s
board.
In recent weeks, Mr. Icahn has built up a stake in
Dell that he has described only as “substantial.” The exact size isn’t
clear.
On Thursday, Dell’s board disclosed a letter from
the activist investor calling for the company to scrap the sale in favor of
paying out a special dividend of $9 a share. Such a move, which would be
financed by borrowing billions of dollars, is known as a leveraged
recapitalization.
If Dell did not comply, Mr. Icahn wrote in the
letter, he would consider seeking seats on the board and threatened “years
of litigation.”
Advisers to a special committee of Dell’s board met
with Mr. Icahn last week, asking him to take part in the go-shop, according
to people briefed on the matter. Company directors had wanted the hedge fund
manager to provide a concrete alternative to Mr. Dell’s offer.
In early discussions with advisers to the committee,
Mr. Icahn floated the idea of buying some of Dell’s shares at a price of
about $15 each, these people said. But he later shifted his focus to the
special dividend proposal, a move that directors had considered and
discarded as inferior to the leveraged buyout.
Shares of Dell rose 1.5 percent on Monday, to
$14.37, suggesting that investors believe a higher offer for the company is
around the corner. Some analysts and investors have suggested that Mr. Dell
and Silver Lake could prevail by improving their bid to $15 a share,
something that the two are currently loath to do.
But it is unclear whether, having formally joined
the go-shop process, Mr. Icahn will make a firm bid for some or all of Dell.
His letter to the board last week offered to provide temporary financing for
a special dividend under certain conditions, but did not specify the sources
of that money.
A number of other companies have also signed
nondisclosure agreements as part of the go-shop process, people briefed on
the matter have said. They include
Hewlett-Packard, Lenovo and
the Blackstone Group.
But people briefed on the process believe that none
of those companies will enter a formal proposal, instead seeking to get a
rare peek inside Dell’s books.
“The special committee welcomes Carl Icahn and all
other interested parties to participate in the ‘go-shop’ process,” the Dell
committee said in a statement. “Our goal is to determine if there are
alternative transactions that could be superior to the going-private
transaction and to secure the best result for Dell’s public shareholders —
whether that is the announced transaction or an alternative.”
The go-shop is scheduled to expire on March 22.
Afterward, Dell is expected to begin a campaign to counter allegations that
the offer from Mr. Dell is too low.
A version of this article
appeared in print on 03/12/2013, on page B4 of the New York edition with the
headline: Dell Agrees To Show Financials To Icahn.
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.
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dell@shareholderforum.com.
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