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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.


 

 

For information about the Forum’s “requested access to the information used by Dell’s board to evaluate the buyout deal” referenced in the article below, see the following summary of the request supported by a formal demand for records (including a link to the letter presenting the demand):

 

Source: The Wall Street Journal Deal Journal, March 7, 2013 article

THE WALL STREET JOURNAL.

WSJ Blogs


Deal Journal

An up-to-the-minute take on deals and deal makers


March 7, 2013, 3:21 PM 

Dell Battle Could Linger Even With Icahn


It is unclear what power Carl Icahn might wield in the battle to win shareholder votes at Dell Inc.

Reuters

 

 
   

He has not yet disclosed his stake in the company, describing it only as “substantial.” Already, about 15% of Dell’s shareholders, including Southeastern Asset Management and T. Rowe Price Group, have publicly stated their opposition to the current proposal. Still, another 30% or so of Dell’s remaining holders, excluding Mr. Dell and his 16% stake, are needed for a majority to defeat or approve the deal.

Southeastern provided a detailed analysis last month that argued that Dell is worth closer to $24 than $13.65. Some say that now, Mr. Icahn and his larger-than-life presence, bolstered by his many media appearances and forceful language, could serve to rally undecided voters against the company.

Southeastern started everyone’s thinking with some very professional analyses of possible financial alternatives, and now Icahn has taken it a step further and presented his own very clear proposal of something investors can specifically compare with Dell’s proposal,” said Gary Lutin, chairman of The Shareholder Forum, an organization that works with companies and investors, and has requested access to the information used by Dell’s board to evaluate the buyout deal.

Even so, the outcome of the battle for votes may not become clear for several months. Active investors such as Mr. Icahn and Southeastern only represent a small portion of Dell’s shareholder base. The largest block of Dell holders are the passive index mutual funds and exchange-traded funds that own the stock only because it is constituent of indices like the S&P 500. About 18% of Dell Inc. shares were owned by passive index funds at the end of last year, according to an analysis of the most recent filings by Ipreo, a capital markets data and advisory firm.

These funds typically wait until months after an agreement is struck to begin deciding how to vote, as the official paperwork is sent for regulatory approval. Many of them follow the advice of firms like Institutional Shareholder Services and Glass Lewis & Co., which are paid by institutions to recommend how to vote on proxy matters, such as the election of directors, executive pay, and proposed mergers. These firms are not expected to issue their analyses until the vote is officially called, which would be after an SEC review of the filing of proxy proposals.

Increasingly though, ETFs and index funds have been under pressure to develop independent views as well, which could make their votes more difficult to predict.

“Index funds can be the toughest to read, but they will be a key swing vote,” said Brad Allen, director of Branav Shareholder Advisory Services Inc., which works with boards to evaluate how shareholders will vote in a proxy contest.

Some shareholders have already voted by selling their shares to people like Mr. Icahn or other merger arbitrage traders, or “arbs,” betting that the deal does or does not go through.

“We thought the [proposed buyout] deal would go closer to $15 [a share],” said Joanna Shatney, head of U.S. large-cap equities at Schroder Investment Management North America Inc. But Ms. Shatney said that rather than fight for more, the fund she managed was selling down its small Dell stake, because “we don’t see a number of other suitors” who could offer a better price.

Copyright ©2013 Dow Jones & Company, Inc. All Rights Reserved

 

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.