Provisions for Dell Valuation Trust Support of Marketable Appraisal
Extended period for definition of
Conditions for investor participation
The early settlement of
Icahn’s appraisal rights, reported Friday,
will allow us to focus the Dell Valuation Trust’s plans much more
effectively on the interests of investors seeking fair value
realization. With reduced risks of disruption and confusion, a sound
foundation for both current pricing and long term investor interests
can now be based on a more predictable process and a rational
determination of value.
Anticipating orderly progress, provisions for defining the
alternatives to be supported and for investor participation in the
Trust are summarized below.
Extended period for definition of Trust-supported alternatives
To assure careful
consideration of all investor interests that are now relevant, we are
extending the period that was to have ended last week for participant
advice to define the alternatives they want the Trust to make
available for marketable investment structures.
Suggestions are encouraged now, until this Friday, October 11.
It should be understood that the settlement of Icahn’s appraisal
rights, while generally beneficial to other investors, reduces the
efficiencies that might have been achieved with his 156 million
shares. For example, a publicly registered, exchange-listed
alternative will be worth developing only if it is to be used by Trust
participants with sufficiently large holdings to support active
trading – probably at least 20 million of the reported 68 million
remaining shares demanding appraisal rights. Fortunately, though, most
other forms of marketable investment structure, including the “basic
form” as well as leveraged or preferential distribution alternatives,
will be viable for much smaller amounts.
Preliminary definitions of alternative investment forms will be
reported to Trust participants next week.
Conditions for investor participation in Trust
The policies and processes
for Dell Valuation Trust support of investor interests have been
developed based on discussions with many actively interested investors
who want to be able to treat an interest in appraisal rights as a
practical investment. Investor priorities for independent management
and reporting have been addressed in several previous Forum reports,
and we will of course continue to refine our objectives for support of
For holders of Dell appraisal rights who have not been actively
involved in the planning of the Trust’s support services, some of the
key conditions for participation are summarized below.
No need to file a petition, but free support to do so if
investor wants identification
Investors that authorize Trust management of their appraisal rights
investments will not have to file their own petitions or otherwise
appear formally in the Delaware court. The Trust will be filing a
single petition to establish its ability to represent the interests of
all Trust participants, using one participant’s Dell stock that had
been registered as directly owned prior to the record date so that
there could be no possible challenge to the petitioner’s status.
Any investor that wants to file its own petition, however, whether for
purposes of public identification in the court records or for any
other reason, will be able to do so with Trust support. There will be
no additional costs for this accommodation.
No need to engage attorney, but optional provisions for
Trust management of an investor’s appraisal rights will include the
legal services of Fish & Richardson to represent their interests in
the Delaware court appraisal proceedings, and for all related
requirements such as the engagement of experts. Since there will be no
need for Trust participants to file their own separate petitions,
there will be no need for them to engage separate legal representation
to appear for them in court.
Though not necessary, the Trust welcomes investors to designate legal
representatives who can guide them as well as the Trust in the
progress of the appraisal proceeding. Qualified attorneys designated
by participating investors may serve as either (a) co-counsel in the
court proceedings or (b) members of the Review Panel committee
described in the next section.
Review Panel reporting, investor designation of members
Investor participants will be encouraged to propose members of a
“Review Panel” committee to confer confidentially with counsel for the
appraisal rights proceeding and provide public reports to Trust
investors on developments and progress.
Payment for eligibility certification refunded upon proceeding
To allow investors the flexibility of assuring access to Trust support
of their appraisal rights before making final decisions about
proceeding with the rights or withdrawing, the Trust requires a
refundable cash payment for its review of the status of the rights and
certification of eligibility for Trust management.
The base payment for an eligibility certification was established at
one cent per share, subject to minimum amounts. This amount will
remain effective until the end of this week, October 11. After that
date, a supplemental charge of one-tenth of a cent ($0.001) per share
will be added each calendar day, and an additional half cent per share
will be added on the effective date of the merger.
The base penny-per-share payment will be fully refunded to the
investor in cash 90 days after the investor makes the Trust
responsible for managing the rights. The supplemental charges will not
Trust pays all costs of proceeding, no payments from investors
Investors will not be required to make any payments other than the
refundable charge for eligibility certification. All costs of the
appraisal proceeding, including the conventionally non-contingent
costs of experts and court fees, will be paid by the Trust as part of
its management responsibilities.
The only expense born by investors in Trust-managed appraisal rights
will be accruals of the Trust management fees that are to be deducted
from the proceeds when they are ultimately distributed, as described
in the next section.
Trust fees accrued and deducted from final
The contractual Trust management fees to be deducted from final
distributions of appraisal rights consist of a base charge of one cent
per month per share (an annual rate of 0.87% based on the $13.75 per
share offer price) starting on the effective date and a performance
fee equal to 20% of the amount by which the total payment for
appraisal rights exceeds the offer price plus the accrued base costs.
For simplified analysis, investors in Trust-managed appraisal rights
will have no payment requirements and be entitled to a net
distribution equal to
100% of the amount up to the original offer price with an effective
net interest accrual equal to 4.13% (the statutory 5% less the 0.87%
management fee accrual) over the Fed discount rate, and
80% of the “fair value” in excess of the offer price with interest at
5% (no adjustment for management fees) over the Fed discount rate.
Your questions and comments will be welcomed.
GL – October 8, 2013
Chairman, The Shareholder Forum
575 Madison Avenue, New York, New York 10022