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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.

Source: Barron's, January 25, 2014 article

Follow Up | SATURDAY, JANUARY 25, 2014

Dell's Prospects Suddenly Brighten

The news from the company was gloomy when Michael Dell was pushing for a leveraged buyout at a modest price. Post-LBO, he says that the PC maker is enjoying "double-digit growth."

Three months after the contentious leveraged buyout of computer maker Dell, the company appears to be experiencing a miraculous turnaround. In an appearance on Charlie Rose last month, founder Michael Dell repeatedly said the PC manufacturer is seeing "double-digit growth."

Recall that as recently as last summer, as Michael Dell and Silver Lake Partners pursued the LBO, news from the company was unremittingly bleak.

On Oct. 29, 2013, after a nine-month battle that was frequently chronicled in the pages of Barron's, Dell prevailed over the opposition of activist investor Carl Icahn and other shareholders, taking the company private in a $25 billion deal.

On Monday, Dell plans to issue its first financial report since going private, for the period ended on Oct. 31, though it is taking an unusual approach because it won't publicly release its financial results.

Institutional investors who hold the company's debt will get access to the report and conference call if they sign nondisclosure agreements. Most companies that go private release results publicly, especially if, like Dell, they have public debt outstanding.

Dell's results probably will leak out, anyhow, given the large number of investors who will have access to it.

Michael Dell's recent statements provide belated support for Icahn, Southeastern Asset Management, and other buyout opponents who argued that the Dell board, in an attempt to justify its decision to sell the company for a low-ball price under $14 a share, offered an overly pessimistic view of Dell's prospects. The board suggested that the PC business was in trouble, that Dell lacked scale in its newer software and services businesses, and that the share price would collapse if the deal were voted down.

In the April 1, 2013, cover story ("Michael Dell's Folly") and elsewhere, Barron's argued that Dell and Silver Lake were underpaying for the company.

On Charlie Rose, a confident Michael Dell talked about doubling the size of the company's software and services business to $42 billion in annual sales, while noting, "Our business is up double digits already." Rose took a shot at Icahn, calling him an example of people "who don't care about the products.…It's financial engineering." Dell added, "It's not how I would want to spend my life." Neither Icahn nor Dell would comment to Barron's.

One notable development in recent months is an apparent bottoming in the supposedly terminal PC market, with JPMorgan analysts now forecasting flat sales volume this year. That should help Dell. PC-related stocks are up sharply in the past year. Big winners include Western Digital (ticker: WDC), Seagate Technology (STX), and Hewlett-Packard (HPQ), the closest comparable company to Dell. HP shares, at $29, have almost doubled in the past year. Dell, if it had remained independent, probably would be trading in the high teens now, based on HP's price.

All this suggests that Michael Dell could make a killing with the LBO. He and Silver Lake put up about $5 billion, and used the company's own cash and borrowings for the rest of the tab. There's speculation that Michael Dell is eyeing 25%-plus annualized returns.

-- Andrew Bary

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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