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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.

Note: On December 14, 2017, the Delaware Supreme Court reversed and remanded the decision above, encouraging reliance upon market pricing of the transaction as a determination of "fair value." The Forum accordingly reported that it would resume support of marketplace processes instead of judicial appraisal for the realization of intrinsic value in opportunistically priced but carefully negotiated buyouts.



Source: New York Times DealBook, March 11, 2013 article

Hedge Funds | Mergers & Acquisitions

Dell Agrees to Open Its Books to Icahn


Chad Batka for The New York Times

Carl Icahn has suggested a so-called leveraged recapitalization of Dell

Dell Inc. has agreed to open its books to the activist investor Carl C. Icahn, signaling a possible truce on one front in the battle over the computer maker’s proposed $24.4 billion buyout.

In exchange, the billionaire — who was critical of the deal just last week — has agreed to confidentiality, which silences, temporarily at least, the influential investor.

In a brief statement on Monday, Mr. Icahn’s firm said that it “looks forward to commencing its review of Dell’s confidential information.”

By signing the agreement, Mr. Icahn will formally participate in a “go-shop” process being run by a special committee of Dell’s board. It is meant to flush out offers that could potentially top the $13.65-a-share bid made by the company’s founder, Michael S. Dell, and the investment firm Silver Lake.

Last week, Mr. Icahn appeared poised to join a chorus of opposition to the leveraged buyout proposal. That group already includes two of Dell’s biggest outside shareholders, Southeastern Asset Management and T. Rowe Price. Southeastern and Mr. Icahn have been on the same side in a battle before: Both agitated for change at Chesapeake Energy, and the two eventually won seats on the oil driller’s board.

In recent weeks, Mr. Icahn has built up a stake in Dell that he has described only as “substantial.” The exact size isn’t clear.

On Thursday, Dell’s board disclosed a letter from the activist investor calling for the company to scrap the sale in favor of paying out a special dividend of $9 a share. Such a move, which would be financed by borrowing billions of dollars, is known as a leveraged recapitalization.

If Dell did not comply, Mr. Icahn wrote in the letter, he would consider seeking seats on the board and threatened “years of litigation.”

Advisers to a special committee of Dell’s board met with Mr. Icahn last week, asking him to take part in the go-shop, according to people briefed on the matter. Company directors had wanted the hedge fund manager to provide a concrete alternative to Mr. Dell’s offer.

In early discussions with advisers to the committee, Mr. Icahn floated the idea of buying some of Dell’s shares at a price of about $15 each, these people said. But he later shifted his focus to the special dividend proposal, a move that directors had considered and discarded as inferior to the leveraged buyout.

Shares of Dell rose 1.5 percent on Monday, to $14.37, suggesting that investors believe a higher offer for the company is around the corner. Some analysts and investors have suggested that Mr. Dell and Silver Lake could prevail by improving their bid to $15 a share, something that the two are currently loath to do.

But it is unclear whether, having formally joined the go-shop process, Mr. Icahn will make a firm bid for some or all of Dell. His letter to the board last week offered to provide temporary financing for a special dividend under certain conditions, but did not specify the sources of that money.

A number of other companies have also signed nondisclosure agreements as part of the go-shop process, people briefed on the matter have said. They include Hewlett-Packard, Lenovo and the Blackstone Group.

But people briefed on the process believe that none of those companies will enter a formal proposal, instead seeking to get a rare peek inside Dell’s books.

“The special committee welcomes Carl Icahn and all other interested parties to participate in the ‘go-shop’ process,” the Dell committee said in a statement. “Our goal is to determine if there are alternative transactions that could be superior to the going-private transaction and to secure the best result for Dell’s public shareholders — whether that is the announced transaction or an alternative.”

The go-shop is scheduled to expire on March 22. Afterward, Dell is expected to begin a campaign to counter allegations that the offer from Mr. Dell is too low.

A version of this article appeared in print on 03/12/2013, on page B4 of the New York edition with the headline: Dell Agrees To Show Financials To Icahn.

Copyright 2013 The New York Times Company


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.

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