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.


 

 

For a printable copy of this report, click here.

Forum Report: Dell Appraisal Rights

Response to Proposal for Revised Management of Dell Appraisal Case

The comments some of you have offered on the proposals presented in last week’s motion by petitioners managed by Magnetar Capital,[1] and on the preliminary summary of the issues they raised,[2] have been very helpful in defining the interests of Dell investors with unchallenged appraisal rights.

We will be asking counsel for the Cavan petitioner to present these interests for the court’s consideration, and will appreciate your further comments on the following points and any additional concerns to refine what we report.

1.

Reliance upon counsel representing challenged petitioners: The lawyers engaged to represent the petitioners managed by T. Rowe Price have a primary duty to serve those client interests. As indicated in the Magnetar motion and previous Forum reports,[3] the recently discovered eligibility issues of the T. Rowe Price petitioners make their interests different from – and possibly opposed to – the interests of claimants with unchallenged appraisal rights. Counsel for the T. Rowe Price petitioners should therefore not be expected to also serve the unchallenged claimants as contemplated in their appointment as “Lead Counsel” prior to the disclosure of conflicting interests.

2.

Proposal of “Co-Lead Counsel” arrangement: Questions have been raised about the need to create a new “Co-Lead” arrangement rather than simply appoint a substituted Lead Counsel to perform the duties that are defined by the court’s existing Consolidation Order. The provisions of that Order already support the active involvement of any petitioner’s counsel, so that substitution of a new Lead Counsel would allow counsel for the T. Rowe Price petitioners to participate as much as they could in the role of a newly defined “Co-Lead Counsel.” The simpler form of leadership may also be more efficient, of course, in terms of orderly progress as well as costs.

3.

Proposal to establish “Co-Lead Petitioners,” generally: Nothing could be found in the existing Consolidation Order, or in the statute establishing appraisal rights,[4]  that provides for an official “lead” designation for petitioners. Whether permissible or not, the motion did not explain how the creation of this legal position would benefit the process or the interests of claimants. Many Forum participants, it should be noted, believe they can rely upon Delaware’s appraisal of fair value partly because of the well-tested rules for an orderly court proceeding that provides rights for all petitioners to be heard. Revisions to allow management of the process like a securities class action would raise concerns about ultimate investor interests in their commitments of long term capital to corporate enterprises.

4.

Consideration of candidate if court establishes “Lead Petitioner” control: If the court decides to create authority for the proposed “Co-Lead Petitioners” or a single “Lead Petitioner,” it is assumed that any appointment would be subject to determining whether a candidate has any relationships with Dell or its private equity investors, or any direct or derivative interests in Dell’s debt securities. It is also assumed that the court would define a process for participation in a review by other petitioners whose rights would necessarily be conceded to the “Lead Petitioner.”

Simply stated, it appears that the existing Lead Counsel (a) has duties that conflict with the interests of unchallenged claimants and (b) has not been voluntarily providing information as expected of either a Lead Counsel or an officer of the court. We should of course rely upon the court to decide how this can be most effectively resolved, but for the court to do so investors must satisfy their responsibilities to inform the court of their interests.

GL – August 25, 2015

Gary Lutin

Chairman, The Shareholder Forum

575 Madison Avenue, New York, New York 10022

Tel: 212-605-0335

Email: gl@shareholderforum.com

 

 

 

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.