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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.

Note: My observations reported below were intended to address the general conduct of Dell's special committee, and not yesterday's decision to adjourn the meeting. The adjournment was in fact a clearly proper action to deal with their reported failure to solicit votes from holders of 23% of the company's stock. - GL

For a related article addressing the Dell special committee's marketing efforts, see

July 12, 2013 New York Post: "Icahn to boost bid as Dell big reboots"

Source: New York Post, July 19, 2013 article

Dell comedy time

Board losing cred after postponing buyout vote

By Josh Kosman and Mark DeCambre

Last Updated: 1:31 AM, July 19, 2013
Posted: 11:52 PM, July 18, 2013

Dell’s board is starting to have a big credibility problem.

Complaints from shareholders, which had quietly piled up over recent weeks, roared out loud yesterday after Dell’s special committee decided to postpone the vote on a $24.4 billion buyout.

The major gripe? That the committee was losing sight of shareholders in favor of one in particular — Michael Dell.

“The only reason to delay [the shareholder meeting] is because the votes aren’t there to get it done,” noted Richard Pzena, a New York investor in Dell, referring to the committee’s decision to scuttle yesterday’s shareholder vote on Michael Dell’s offer — and move it to July 24.

That’s Carl Icahn (above) showing up Michael Dell as the battle for ownership of the computer giant goes into overtime.

Like Pzena, a slew of shareholders, including Carl Icahn and Southeastern Asset Management, have been griping that the committee — headed by Alex Mandl — was too quick to fall in line behind founder Dell’s $13.65-a-share Silver Lake-backed bid to take the computer company private.

The vote yesterday — with the tally running strongly against Michael Dell — was postponed minutes before it was going to be finalized at the PC-maker’s Round Rock, Tex., headquarters.

Gary Lutin, a consultant at Shareholder Forum, said “M&A professionals are amazed to see a supposedly unbiased special committee hiring public relations advisers and doing road shows to pitch a deal. Their antics seem to be focused only on proving they have no personal legal liabilities instead of on the real interests of either the company or its shareholders.”

The committee seemed to ignore shareholder unrest and, in a statement, pinned the anxiety solely on Carl Icahn, who has been leading the charge against the offer — claiming Michael Dell is looking to get the company on the cheap.

“We wish to note that it is unfortunate Mr. Icahn continues to conduct his campaign by trying to discredit the special committee and accuse it of frightening Dell stockholders,” the committee said.

With Michael Dell not voting his 16 percent stake, proponents of the buyout offer needed 42 percent of shareholder to approve the deal. They failed. Roughly 30 percent abstained — which counted as a “no” vote.

The committee is expected to use the extra six days to woo shareholders — likely telling them the offer isn’t going to be raised. Some, perhaps engaging in extreme gamesmanship, floated the idea of a 50-cent special dividend to entice holdouts.

One index investor said, “What you are hearing is something [the dividend] that is plausible, and my guess is if they take that step it will be in response to testing it with some fence-sitters first to see if that would win them over.”

The buyout battle, waged over six months, has, in some views, also left the Dell committee vulnerable if the buyout does not succeed.

One Dell analyst, requesting anonymity, said the special committee has been so bearish in its forecasts for the company as it tried to get shareholders to vote for Michael Dell that he will have to change his projections if the buyout fails.

Meanwhile Icahn is trying to sign up a big-name executive this week who he could announce would run Dell under his leadership.

jkosman@nypost.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.

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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.

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