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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.

 

 

For a printable copy of this report, click here.

Forum Report: Dell Valuation Trust and Appraisal Rights Investments

 

Dell Objections to Shareholder Demands for Appraisal

Dell has prepared an “Amended Verified List” of demands for appraisal, delivered the evening of Presidents’ Day to counsel for the petitioner Cavan Partners and the Dell Valuation Trust.[1] The affidavit of the company’s lawyer states that the List has been updated from their initial November 25, 2013 filing to reflect currently known facts since “a number of stockholders have withdrawn their demands for appraisal and/or accepted the merger consideration,” and also since Dell “has continued to investigate whether the stockholders listed on the verified list are entitled to appraisal.”

One of Dell’s sworn statements requires comment. The Amended List now includes a claimed objection to the previously unchallenged Cavan demand, stating “A check for the merger consideration has been issued to the stockholder.” We have of course confirmed that Cavan did not request or agree to any payment, and is not aware of any check being delivered. In any event, Dell’s claim does not seem to make sense because Delaware law states that a demand for appraisal cannot be withdrawn by an investor who has commenced a proceeding,[2] and Dell obviously knows that Cavan was the stockholder that commenced the proceeding[3] to which their Verified List responds.

We can only speculate about the meaning and purpose of Dell’s unconventional objection. This kind of claim was not made in relation to any of the other 213 listed demands for appraisal. This is especially notable since there were objections to 97 other demands based on claimed payments (all but one for individual investors), but stated very differently as a conventional challenge: “The stockholder has been paid the merger consideration, and consequently is ineligible for appraisal.”

Legal counsel will of course address Dell’s objection during the course of the proceeding, but there appears to be no reason for concern about the viability of the Cavan petition. One view of the odd objection, in fact, is that we should consider it to be a very positive indication that Dell could find no better way to discourage the progress of a Trust petitioner that is clearly secure from either legal eligibility challenges or investment liquidity pressures.

GL – February 19, 2014

Gary Lutin

Chairman, The Shareholder Forum

575 Madison Avenue, New York, New York 10022

Tel: 212-605-0335

Email: gl@shareholderforum.com

 

[1] A copy of the filing can be made available upon request: February 17, 2014, Cavan Partners, LP, a Dell Valuation Trust participant, petitioner, v. Dell Inc., respondent, Del. Ch. CA No. 9046, Respondent’s Amended Verified List Pursuant to 8 Del. C. § 262(f).

 

 

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.