Forum Home Page see Broadridge note below]

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.


 

Forum Home Page see Broadridge note below]

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

     

Forum distribution:

Fund manager now blames "computer glitch" instead of proxy service firms for voting the wrong way

 

For links to the legal briefs presenting the arguments addressed in the hearing reported below, and to the report of evidence that the fund manager had not voted as stated in its verified appraisal petitions, see

 

Source: Law360, March 18, 2016 article


T. Rowe Price Fights To Stay In Dell Stock Appraisal Case


By Matt Chiappardi


Law360, Wilmington (March 18, 2016, 9:15 PM ET) -- T. Rowe Price urged the Delaware Chancery Court on Friday not to accept Dell’s argument that its shares are ineligible for judicial appraisal, contending that it consistently opposed the computer giant’s $25 billion take-private deal even though a “computer glitch” made it vote in favor.

During a hearing in Wilmington, T. Rowe Price Associates Inc. attorney Stuart M. Grant of Grant & Eisenhofer PA argued that the analysis doesn’t have to simply stop at how the shares were voted, but the Chancery Court can examine a shareholder’s actual intent and look at the circumstances surrounding the voting instructions to do it.

Under Delaware law, shareholders can seek appraisal of their shares after a change-of-control transaction, provided they did not vote for, or publicly support, the deal, and T. Rowe Price, one of the largest stockholders seeking an adjustment, maintains it has steadfastly opposed Michael Dell’s take-private bid.

But T. Rowe Price’s funds, through a series of proxies, voted for the deal, despite instructions to cast ballots against, and in court Friday, Grant argued that the investment management firm’s votes didn’t affect the outcome and that its intent ought to be honored.

“There is no equitable reason whatsoever to deny them appraisal,” Grant told Vice Chancellor J. Travis Laster.

Dell stuck to its position that T. Rowe Price was not eligible to be part of the massive appraisal action of the take-private deal, in which the petitioning shareholders are arguing the computer giant’s stock was
worth twice the deal consideration, because the results of their vote are all that matters under the applicable Delaware law.

If there was some sort of mistake over what happened with T. Rowe Price’s vote, that’s not relevant to the First State law that governs judicial appraisal, Dell attorney John D. Hendershot of Richards Layton & Finger PA said in court.

“The issue here is the vote,” Hendershot said. “It’s not the shareholder’s intent.”

Hendershot argued that if the Chancery Court were to allow T. Rowe Price to be eligible for appraisal, it could open the door to shareholders making tactical moves where they publicly oppose a merger and then somehow vote in favor with impunity.

Grant countered that in this instance, T. Rowe Price’s ballots were not even close to being a swing vote, and that Hendershot’s arguments actually bolstered his point that the court should have the ability to consider factors beyond how the shares were voted.

“What are we going to do when someone really wants to rig the system?” Grant said.

The unusual issue is yet another way the Dell case is testing the edges of Delaware law that governs judicial stock appraisal, and no matter how Vice Chancellor Laster rules, it will almost certainly be appealed to the Supreme Court.

Dell first broached the issue of T. Rowe Price’s votes when it made a
surprise revelation
during a routine hearing in May and pushed to take discovery to figure out what happened.

Months later, the computer giant urged the court to throw out T. Rowe Price’s appraisal petition and thus eliminate its largest challenger, on grounds that although the investment management firm directed its fund to vote against the transaction, an intermediary's proxy system contained incorrect instructions and the funds' record stockholder, Cede & Co., through a chain of proxies actually cast ballots in favor.

T. Rowe Price argues that Dell was constructing a “gotcha” argument based on a “computer glitch,” but the technology giant maintains that under the technical requirements of Delaware appraisal law, T. Rowe Price must be disqualified; otherwise, it would mean there really was no voting requirement in the statute.

Vice Chancellor Laster has also delved into another unusual statutory issue in the case when he reluctantly ruled a group of funds, including a T. Rowe Price fund, technically lost their appraisal rights when they retitled them in the name of the Cede & Co., the Depository Trust Co.'s partner and nominee.

In his July opinion, the vice chancellor said that an approach more closely tied to federal law would be "preferable," but noted he was bound to Delaware law.

Meanwhile, the vice chancellor is also still mulling the actual appraisal of the Dell stock, which went before him in a five-day trial in October.

The deal price came in at $13.75 per share, but petitioners argue the actual value is more than twice as much — $28.61 per share — meaning Dell left $26 billion in value on the table.

In post-trial arguments, both sides lobbed barbs at the other’s valuation expert, arguing their analyses were “unreliable,” Dell’s because he “manipulated” data, and the petitioners’ because he used untested assumptions.

Dell is represented by Gregory P. Williams, John D. Hendershot, Susan M. Hannigan and Andrew J. Peach of Richards Layton & Finger PA and John L. Latham, Susan E. Hurd, Gidon M. Caine and Charles W. Cox of Alston & Bird LLP.

The petitioners are represented by Stuart M. Grant, Michael J. Barry, Christine M. Mackintosh, Jennifer A. Williams and Rebecca A. Musarra of Grant & Eisenhofer PA.

The case is In re: Appraisal of Dell Inc., case number 9322, in the Court of Chancery of the State of Delaware.

--Editing by Philip Shea.

 


© 2016, Portfolio Media, Inc.

 

This project is being 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. has declined the Forum's invitation to provide leadership of this project, but will be encouraged to collaborate in its progress to assure cost-efficient, timely delivery of information relevant to investor decisions.

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.

 

 

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.