Dell Snubs Request For
Records Related To $24B Buyout
By Liz Hoffman
Law360, New York (March 15,
2013, 8:16 PM ET) --
Dell Inc. on Friday refused a shareholder rights group's request to
view information related to its $24.4 billion buyout, claiming the group
“in effect seeks access to the boardroom” and falls short of Delaware's
standard for books-and-records requests.
In a letter filed with the U.S.
Securities and Exchange Commission, Dell said it will not give the
Shareholder Forum its correspondence with the three investment banks
advising on the deal. The company also won't release its communications
with billionaire investor Carl Icahn, whom it allowed this week to sign a
confidentiality agreement and view certain information.
Delaware law allows stockholders to demand to see a company's books and
records, and allows it to tap an attorney or other agent to execute such a
request. In this case, the Shareholders Forum says it is acting on behalf
of a fund manager, and has so far submitted two requests to inspect Dell's
books and records.
But Dell says the request is a fishing expedition designed to root out
information and share it broadly with the company's investors.
“It is obvious from the face of both demands that neither was submitted
'on behalf of' Cavan Partners LP, a purported [Dell] stockholder, and that
they were at most submitted with Cavan’s authorization, but for purposes
related to the business interests of the Shareholder Forum,” Dell said in
the letter, which is signed by counsel Janet Wright and copied to lawyers
Debevoise & Plimpton LLP,
Morris Nichols Arsht & Tunnell LLP and
Richards Layton & Finger PA.
The Shareholder Forum has been lobbying for an independent valuation of
Dell specifically for its shareholders — essentially, a fairness opinion
for investors. To do that, it needs the same information the company
provided to the investment banks advising on the transaction.
On March 5, the Shareholder Forum asked for all communications with
JPMorgan Chase & Co.,
Evercore Partners Inc. and
Goldman Sachs & Co. dating back to August. On March 11, the group
amended its request to include all information Icahn had received, as well
as all records of Dell's communications with the billionaire. The group
has promised to keep confidential information private.
“If the people proposing a transaction have information that sellers can’t
see, you’re not going to have a viable marketplace,” Gary Lutin, director
of the Shareholder Project, told Law360. “It’s a matter of common sense,
and plain fairness.”
Dell says that's what the proxy statement is for. And it has repeatedly
said its four-member special committee is looking out for shareholders.
But crafting the best deal for investors is separate from helping them
decide how to vote, Lutin said.
“That's not [the special committee's] job,” Lutin said. “They can’t be
expected to know what each investor should do, and I don’t think any
director really wants to assume responsibility for making recommendations
to Investor A with three kids about to go to college, or to some public
pension fund with an indexed portfolio. Every shareholder obviously needs
to make its own decision, and that requires fair access to the relevant
Dell claims that much of the information is confidential and that the
group's scope is overly broad. It said Friday that stockholders “are
entitled to information that is material to the stockholders’ voting
decision”— no more, no less.
And it trotted out a string of Delaware cases to support its point. Among
them is a 2007 decision in a battle between Bill Ackman's Pershing Square
Capital Management LP and
Ceridian Corp. Then-Chancellor William Chandler ruled that Pershing
Square's pursuit of letters between Ceridian executives didn't meet the
standard for Delaware records requests.
In a 2006 case, the court denied a hedge fund's request to view
West Corp.'s books and records in order to evaluate the fairness of a
$4.1 billion offer price. Another 2007 decision, Fairthorne Maintenance
Corp. v. Ramunno, requires investors to tailor their requests to “only to
seek documents proportionate” to their specific needs, Dell said.
The pushback comes as opposition to Dell's leveraged buyout continues to
mount. The deal will see the company acquired by its founder and largest
shareholder, Michael Dell, and private equity firm Silver Lake Partners
for about $5.7 billion in equity, up to $15 billion in debt, and the
remainder in company cash.
Since the deal was announced last month, investors holding about 19
percent of the company's stock — likely higher, depending on the size of
Icahn's stake — said they will vote against the deal. Some are pushing for
a higher price, a special dividend or a chance for current investors to
benefit from future growth.
Dell is represented in the merger by
Hogan Lovells, with Goldman Sachs & Co. acting as financial adviser.
Its special committee is represented by Debevoise & Plimpton, and is
receiving financial advice from JPMorgan, advised by
Davis Polk & Wardwell LLP, and Evercore, advised by
Weil Gotshal & Manges LLP.
Michael Dell is represented by
Wachtell Lipton Rosen & Katz. Silver Lake is represented by
Simpson Thacher & Bartlett LLP.
Microsoft Corp., which is providing a $2 billion bridge loan to help
finance the deal, is represented by
Sullivan & Cromwell LLP.
--Editing by John Quinn.
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