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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.



For related observations of the article's author, see


Source: The Wall Street Journal MoneyBeat, May 7, 2013 commentary





2:33 pm
May 7, 2013


Dealpolitik: The Ominous Commonalities Between Dell and Clearwire




Going-private transactions in which a controlling stockholder or management buys out the public shareholders almost always result in post-announcement grumbles and groans (including in this column). But at the end of the day, if the independent directors have done as a good job as they can under the circumstances, their judgment is generally accepted by shareholders. That may be changing.

Clearwire and Dell have very different businesses and each faces their own unusual strategic challenges.

Clearwire is rich in spectrum but starved of cash to develop it and customers to exploit it. Dell has plenty of cash but strategically finds itself in the midst of a migration away from its traditional PC business.

Yet despite these differences, these deals have run into headwinds with some common themes.

Both drew surprise competing bids. Blackstone made the unusual move to explore jumping another PE firm’s signed deal, a challenge so rare of in the world of PE investors that the major players have been sued for the lack of competition. (They dispute the allegations.)

And Clearwire drew a competing bid even though Sprint owns a majority of Clearwire shares. Conventional wisdom is that once a shareholder can block shareholder approval, there is no opportunity for a competing bid. Dish tried to get around this by proposing spectrum purchases and contractual arrangements that could be implemented without any shareholder vote.

Both of those competing overtures has either been withdrawn or is not being pursued: Blackstone’s as a result of its view of the decline of Dell’s business and Dish’s because of its decision to try to buy Sprint (and through Sprint, Clearwire).

But while Blackstone’s and Dish’s bids have gone away, they continue to cast a shadow on the existing deals by affecting shareholder expectations and raising process questions.

Directors of both companies seem to have lost credibility with at least some of their shareholders by shifting away from the typical cheerleading in which management trumpets a company’s future prospects. Some moderation of management optimism is to be expected once a board has voted to sell a company as the board looks to justify the deal

But in the case of Dell, the special committee’s transformation of its views goes much further than normal. It has clearly lost confidence in management’s ability to accurately forecast results and appears deeply skeptical about management’s strategy and its ability to implement it. Such a negative view of management—which, after all, consist of the people trying to buy the company—is unusual, if not unheard of.

The transformation is particularly remarkable because three months before greenlighting Mr. Dell’s LBO, the board’s compensation committee, in justifying senior executives’ compensation, had cited Dell’s “strong financial results for Fiscal 2012.” In discussing the business strategy the committee said “Management is committed to this transformation as it has shown benefits.”

Some shareholders seem to think the loud cries are a convenient way to justify a sale price that the shareholders consider too low.

Dell’s special committee has maintained it conducted a thorough process and evaluated “the full range of strategic and financial alternatives available to the company.” It has said the agreed-upon deal shifts any risks about the future of Dell to the buyout group while providing the shareholders an acceptable return. And it has pointed to the decline in Dell’s business as a source of its concerns.

In the case of Clearwire, that board’s special committee appears to think the company is running out of options and, perhaps more importantly, is out of money. Although Clearwire says it should have funding through year end, it is talking about defaulting on a significant interest payment this summer. There appears to be a sense among some shareholders of these companies that the directors may be letting shareholders down.

These two factors, along with other developments, have led to the most ominous problem for these deals: Shareholder approval of them is not a foregone conclusion. The problem seems most serious at Clearwire since the market appears to be predicting that the buyout by Sprint in its current form will be defeated by shareholders. About two weeks before the Clearwire shareholders meeting the stock is trading at a level that is more than 10% over the deal price. (Why would shareholders vote for a cash deal if more cash were available by selling on the market?) Plus one of Clearwire’s largest holders is soliciting against the deal.

It is too soon to tell what will happen at Dell. The date of the shareholders meeting has not been announced. Nevertheless, as in the case of Clearwire, there are several large shareholders which have announced their opposition. And there is the possibility that Carl Icahn and/or Southeastern Asset Management will send out their own proxy statement to try to get shareholders to vote against the deal.

In recent years, other transactions have suffered from opposition by activist hedge funds. Those hedge funds generally agitate because they want to negotiate an increase in price. But the level of opposition at each of Clearwire and Dell is unusual. The shareholders are not just seeking a marginal increase in price but are raising issues related to the basic premises and structures of the deals as well.

These are not happy thoughts for future proponents of going-private deals. Nor will the lambasting the Dell and Clearwire special committees are experiencing encourage special committees to charge ahead with such deals in the future.



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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.

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