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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.



A copy of the letter that had been made available to selected reporters the evening of May 9 was publicly disclosed the next morning in the following SEC filing (2013-05-10 06:00:26) as its Exhibit 2 (PDF page 26):


Source: New York Times DealBook, May 9, 2013 article

Mergers & Acquisitions |

Icahn and Southeastern Ready Rival Bid for Dell



Carl C. Icahn, the activist investor, in 2007.

Mark Lennihan/Associated Press

Carl C. Icahn.

The billionaire Carl C. Icahn and Southeastern Asset Management, two of Dell Inc.’s biggest shareholders, plan to bid for the struggling computer maker, seeking to challenge a $24.4 billion takeover that they have criticized as “the great giveaway.”

The effort by Mr. Icahn and Southeastern, disclosed in a letter to Dell’s board Thursday night, is intended as a last-ditch effort to fight the management buyout led by Michael S. Dell, the company’s founder and chief executive, and the private equity firm Silver Lake.

Unlike that bid, which would pay shareholders $13.65 a share in cash, Mr. Icahn and Southeastern are offering to pay shareholders about $12 a share either in cash or in additional shares in the company. The offer would still leave a portion of Dell publicly traded.

And if a special committee of Dell’s board refuses to budge from Mr. Dell’s offer, the two investors have threatened to wage war in the courts.

In the letter to Dell’s board, Mr. Icahn and Southeastern savagely criticize the deliberations that led to Mr. Dell’s offer, calling it inadequate and having the effect of shortchanging other investors.

“We are often cynical about corporate boards, but this board has brought that cynicism to new heights,” the letter said. “This company has suffered long enough from very wrongheaded decisions made by the board and its management.”

Together, Mr. Icahn and Southeastern owned more than 11 percent of Dell’s shares as of late March.

By offering to give shareholders a chance to remain investors in Dell, the two shareholders argue that their bid is worth far more than the current offer on the table. Both shareholders have consistently argued that the company is poised for a rebound in its fortunes, one that they fear would be enjoyed only by Mr. Dell and Silver Lake if their bid were to succeed.

Yet Mr. Icahn and Southeastern’s position runs counter to the apparent views of an investor consortium led by the Blackstone Group, which withdrew from bidding for Dell last month amid concerns that the computer maker’s business was deteriorating faster and more badly than expected. Many investors had hoped that the Blackstone-led group, which proposed paying more than $14.25 a share and would have let investors keep a portion of their holdings, would have succeeded in driving up the price of any deal.

After Blackstone walked away, Dell’s share price — which had traded as high as $14.50 a share in anticipation of a bidding war — tumbled below Mr. Dell’s offer. The company’s stock closed on Thursday at $13.32.

Two months ago, Mr. Icahn outlined a potential offer of about $15 a share for about 58 percent of the computer company, gaining a 24.1 percent stake.

To Mr. Icahn and Southeastern, one of the primary attractions of Blackstone’s offer was that it would keep a portion of Dell publicly traded, in what is known as a stub. Southeastern, the company’s biggest shareholder outside of Mr. Dell himself, has argued loudly that investors should be given the chance to share in what it expects is a resurgence of the computer maker’s fortunes.

But advisers to a special committee of Dell directors have argued that a transaction with a stub would seriously limit the company’s financial flexibility, essentially piling on debt in full view of public shareholders.

Critics of Southeastern have argued that the investment firm is trying to make up for the high average price it paid in amassing its Dell stake. (A person briefed on the matter has estimated that the firm paid about $16.90 a share on average.)

In their letter Thursday night, both Mr. Icahn and Southeastern argued that a number of shareholders already shared their view that Mr. Dell’s offer was insufficient, and threatened a lengthy fight to derail that bid. Such an effort would be likely to include both a challenge in the courts and a potential campaign to oust members of the board.

“Either give shareholders the real choice they are entitled to or face the legal liability for your failures,” the two investors wrote.


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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