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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.

 

Forum distribution:

More confusion in news reports about Dell appraisal rights

 

Note: The article below inaccurately reports that the previously reported November 25, 2013 response of Dell Inc. "denied all accusations" in the petition for appraisal by Cavan Partners as a Dell Valuation Trust participant. There were in fact no "accusations" in the petition, since Delaware's law providing appraisal rights provides for court determination of intrinsic value rather than a determination of wrongdoing. The referenced Dell response was simply their required filing pursuant to DGCL 262(f) of a "Verified List" of shareholders demanding appraisal, and contains no statements of any kind about the company's position relating to the petition, or about anything else other than the required list:

 

Source: Law360, December 2, 2013 article

Dell Says $25B Buyout Didn't Undervalue Company

By Chelsea Naso

Law360, New York (December 02, 2013, 5:54 PM ET) -- In the wake of Dell Inc.'s controversial decision to go private, the computer maker is fighting back against shareholders' accusations that the transaction undervalued the company in an attempt to skimp on investor payouts.

The demand for a stock appraisal by a Delaware Chancery Court, filed Oct. 29 by Cavan Partners LP, stems from Dell's $24.9 billion buyout by founder Michael Dell and private equity firm Silver Lake Partners, which offered investors $13.75 per share with a dividend worth 13 cents per share.

Dell, in its Nov. 25 response, denied all accusations lodged against it by the group of shareholders seeking a larger payout, arguing that Cavan Partners failed to state a claim.

Cavan Partners held 100 shares, according to documents filed in court. The computer maker's largest shareholder was T. Rowe Price Equity Income Fund with about 16.5 million shares, according to court documents.

Representatives from Cavan Partners and Dell were not immediately available for comment Monday.

Dell, once the world's premier PC company, has struggled to shore up business as the proliferation of smartphones and tablet computers eats away at its bottom line. Since 2000, the company's share price has languished after peaking past $50 per share — eventually making way for the buyout bid that ultimately won over investors.

Michael Dell and Silver Lake first unveiled their purchase plans in February, promising one of the biggest leveraged buyouts since the financial crisis chilled deal-making a half-decade ago. The offer gave shape to interviews with the company's founder dating back about three years, in which he suggested he would take the company private if it couldn't compete with fast-rising rivals.

In March, on behalf of Cavan Partners, shareholder rights group The Shareholder Forum sought information from Dell relating to the buyout, including a list of shareholders and how many shares they hold as well as correspondence with billionaire activist investor Carl Icahn and with the three investment banks advising on the deal. Dell shot down the request, claiming the group was after “access to the boardroom” and fell short of Delaware’s standard for books-and-records requests.

Shareholders in September voted to approve the deal after Chancellor Leo E. Strine Jr. of the Delaware Chancery Court upheld last-minute tweaks by Dell's board to voting rules and record date, dousing a stiff and well-publicized opposition campaign that was already losing steam.

In October, Icahn laid down his last arms in his fight to thwart the takeover, scrapping his demand for an appraisal on more than 150 million Dell shares. The move effectively assured that Dell would retreat from the public markets without further incident, and on schedule.

Dell is represented by Gregory Williams and John Hendershot of Richards Layton & Finger PA.

Cavan Partners is represented by Jeremy Anderson and Erin C.E. Battersby of Fish & Richardson PC.

The case is Cavan Partners LP v. Dell Inc., case number 9046-CS, in the Court of Chancery of the State of Delaware.

--Additional reporting by Karlee Weinmann and Drew Singer. Editing by Katherine Rautenberg.

 

© Copyright 2013, Portfolio Media, Inc.
 

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.