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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: The Wall Street Journal, May 28, 2013 article and video


BUSINESS  |  Updated May 28, 2013, 7:48 p.m. ET

Dell Buyout Battle Approaches Heated Phase


The battle for control of Dell is moving into a new, heated phase, as the company and the group trying to buy it will for the first time be able to press their case directly to shareholders. Telis Demos reports.

Photo: AP.

The battle for control of Dell Inc. is about to move into a new, heated phase, when the company and the group trying to buy it will for the first time be able to press their case directly to shareholders.

Already, shareholders have been peppered with arguments for and against the proposed $24.4 billion sale of the computer maker, signed in February, to Silver Lake Partners and Michael Dell, founder and chief executive. But the war has largely been waged in public filings and the media since the agreement was reached in February.

Within days, the company and its would-be buyers are expected to be able to contact investors directly to try to persuade them to vote for the deal, which will let them sell their holdings for $13.65 a share. On Tuesday, Dell shares rose two cents to $13.36.

The deal has been hotly contested almost since its signing, with a portion of the long-term shareholder base already aligned against it. In the final vote, the outcome could come down to how hedge funds and the company's small shareholders end up voting, say people familiar with such showdowns.

"In a close fight, it really gets down to dialing for dollars," said Brad Allen, director of Branav Shareholder Advisory Services Inc., which advises corporate boards on proxy votes. Mr. Allen isn't working on the Dell matter.

The lobbying process can begin once the Securities and Exchange Commission blesses a final version of the deal proxy, which details discussions leading up to the buyout deal and the financial rationale of the directors who approved it. With that approval, expected by people familiar with the process this week, Dell can file a final proxy and set a date for shareholders to vote on whether they will accept the Silver Lake-Michael Dell offer.


The document will likely set a July date for the vote, these people said.

Dell's special board committee that negotiated the deal and the potential buyers won't be the only ones calling shareholders. Activist investor Carl Icahn and Southeastern Asset Management Inc., a large, longtime shareholder of Dell sitting on a loss in its investment, have maintained for months that the deal undervalues the shares and cuts holders out of future upside for the company. They are expected to urge shareholders to vote against the deal with Silver Lake and Mr. Dell. A spokesman for Southeastern declined to comment. Mr. Icahn didn't return calls seeking comment.

The largest shareholders in a proxy contest are typically directly contacted by independent board members or members of a potential buyout group. The parties have hired so-called proxy solicitor firms to advise on those discussions and handle the many hedge funds, mutual-fund managers and individuals who make up the numerical bulk of the shareholder base.

For the smallest shareholders, proxy solicitors employ people who sift through company records of who owns the stock and then dial phone numbers they hope are still accurate. Then, akin to how political campaigns work the phones, they typically work from a script that will urge shareholders how to vote.

Alex Mandl, the head of the Dell special committee and the board's lead director, or other special committee members are likely to take an active role in explaining to major shareholders how and why the board agreed to accept the Silver Lake-led buyout, says a person familiar with their plans.

Mr. Dell may also discuss the buyout deal with shareholders, though his role in soliciting shareholder approval hasn't been determined yet, said people briefed on shareholder outreach plans.

Mr. Dell and his affiliates control 15.6% of the company. But Mr. Dell is effectively excluded from the count, because under the terms of the deal a majority of shareholders beside him must vote in favor of the deal for it to go through.

About 23% of the shareholders excluding Mr. Dell have already said they will oppose the deal. That includes Southeastern and Mr. Icahn, and fund managers T. Rowe Price Group Inc., Pzena Investment Management LLC, and Yacktman Asset Management LP.

Another quarter of the non-Mr. Dell votes, as of the most recent reporting date at the end of March, are passive funds, according to Ipreo, a capital markets data and advisory firm.

Some of these passive funds say they explicitly follow the recommendations of the proxy advisory firms Glass Lewis & Co. or Institutional Shareholder Services, a unit of MSCI Inc. For example, Invesco Ltd.'s PowerShares unit, which holds about 1.2% of stock not owned by Mr. Dell, states that it defers to Glass Lewis's recommendations. The exchange-traded-fund operator has no voting opinion or committee.

Glass Lewis and ISS will publish recommendations some time after the proxy process has officially begun, according to their spokespeople.

Others retain discretion. For example, Vanguard Group Inc., which owns 4.4% of the non-Mr. Dell shares according to its most recent filing, has a committee that reviews how its funds will vote, with the goal of maximizing the investments for shareholders, according to its proxy guidelines. Invesco and Vanguard declined to comment further.

"Portfolio managers get quite heavily involved in proxy votes related to M&A transactions," said Robyn Bew, director of research at the Washington, D.C.-based National Association of Corporate Directors.

The remaining voter base, about half of the non-Mr. Dell shares, includes actively managed mutual funds and hedge funds. Some of those will be the easiest shareholders to contact and lobby. Others may not be willing to discuss their votes, or may be locked into voting for or against the deal based on their trading strategies, such as merger arbitrage traders, or "arbs," who buy stock at prices just below a takeover offer, hoping to pocket the difference if the offer goes through.

"You may or may not hear out their side of the story," said Joseph Ray, president of Gerald L. Ray & Associates Ltd., a Dallas-based money management firm with $470 million in assets as of the end of last year. The firm held 62,000 shares of Dell as of the end of March, according to FactSet. "It depends on the quality of the call you get, when they get you, and how busy you are." Mr. Ray said he hadn't yet decided to how to vote.

Some funds may also not make up their minds until late in the process, meaning that even if the final vote isn't close, the lobbying will still be fierce. For example, in the case of the J. Crew Group Inc. takeover by private equity in 2011, though the final vote approved the deal by a comfortable margin, some of the biggest holders didn't state how they would vote until just before the deadline.

"As you get toward the last week and a half, it can really start turning into the fast and furious," said Mr. Allen of Branav.

Individual shareholders are the hardest to reach and pin down. Finding these voters will be especially key for Dell's committee and the buyout group. Shareholders who abstain essentially count as "no" votes on the takeover. That is because under the terms of the deal, the buyout group must win a majority of all shareholders, not just the votes that are cast.

Write to Telis Demos at, Shira Ovide at and David Benoit at

A version of this article appeared May 29, 2013, on page B1 in the U.S. edition of The Wall Street Journal, with the headline: 'Dialing for Dollars' in Dell Buyout Vote.

Copyright ©2013 Dow Jones & Company, Inc. All Rights Reserved


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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