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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 subsequently filed SEC reports of the agreements and communications reported below, including disclosure of the $13.52 per share price of the transaction which was unknown at the time of publication, see


Source: New York Times DealBook, June 18, 2013 article

Hedge Funds  |  Mergers & Acquisitions  |  June 18, 2013, 1:29 pm

Icahn Buys Half of Southeastern’s Stake in Dell and Calls for a Stock Buyback


Carl C. Icahn, the billionaire activist investor.

Chad Batka for The New York Times

Carl C. Icahn, the billionaire activist investor.

Carl C. Icahn isn’t backing away from his fight over Dell Inc.‘s proposed $24.4 billion management buyout just yet.

The billionaire investor wrote in an open letter to shareholders on Tuesday that he had bought half of the stake held by his fellow dissident investor, Southeastern Asset Management. That raised his own holdings to about 152 million shares, according to data from Bloomberg, putting the size of his position behind only that of the company’s founder,  Michael S. Dell.

Both Mr. Icahn and Southeastern remain allied in their bid to defeat the takeover offer by Mr. Dell and the investment firm Silver Lake, however. Mr. Icahn went further on Tuesday, demanding that Dell instead begin a tender offer for 1.1 billion shares at $14 apiece.

That is higher than the $13.65-a-share that Mr. Dell and Silver Lake are offering.

To press forward with the tender offer, Mr. Icahn urged shareholders to vote down the management buyout proposal and support a slate of directors that he and Southeastern have put forward. The billionaire expects that new board to roll out the share buyback plan.

Tuesday’s announcement highlights Mr. Icahn’s unwillingness to walk away from a fight that has seemed to become only more difficult.

In his letter, the hedge fund magnate  criticized Dell’s defenses against his offer, arguing that the company is besmirching the quality of its own products to downplay its business prospects.

“In what other context would the person tasked with selling a product actually spend their efforts negatively positioning the very product they are trying to sell?” he wrote in the letter.

A spokesman for Dell said in a statement, ““As the board’s special committee continues to oversee its process, we remain focused on our customers and on providing innovative products and solutions to help them succeed and better compete.”

Elements of Tuesday’s announcement were aimed at rebutting speculation that Mr. Icahn and Southeastern were preparing to walk away. In a separate statement, Southeastern said that while it was selling half of its holdings to Mr. Icahn, it still intends to vote against both Mr. Dell’s takeover bid and for the alternate director candidates.

“Icahn has Southeastern’s full support as it leads the proxy fight in the interest of all shareholders against the undervalued management buyout proposal,” the asset management firm said. “Southeastern will continue to participate in the proxy contest with Icahn to defeat the Michael Dell / Silver Lake management buyout proposal.”

Seeking to push back against reports that he was having trouble corralling the financing necessary to support the stock buyback plan, Mr. Icahn contended that he has commitments from “a major investment bank” to provide $1.6 billion. The investor himself is will to furnish an additional $2 billion.

He also disputed calculations by a special committee of Dell’s board that such a stock repurchase plan would saddle the company with a big hole in its balance sheet.

Mr. Icahn wrote: “It appears to us that the only clear shortfalls at Dell are from poor execution which interestingly occurred during the first half of the year (including starting a PC price war a mere two months before a going-private transaction, granting retention cash bonuses to employees and prepaying debt) and negotiating a high breakup fee in the Michael Dell/Silver Lake deal.”

Shareholders seemed unenthusiastic about Mr. Icahn’s chances for victory, however. Shares in Dell were up less than half a percentage point by midafternoon on Tuesday, trading at $13.46 each.

Here is a copy of Mr. Icahn’s letter:

Dear Fellow Dell Shareholders:

We take this opportunity to respond to rumors regarding the availability of financing for our proposal for a recapitalization at Dell and to address recent statements by Dell that demean the prospects of Dell. We are amazed by these statements by the Dell Board. In what other context would the person tasked with selling a product actually spend their efforts negatively positioning the very product they are trying to sell? Is that how the supposed “go-shop” was conducted? Can you imagine a real estate broker running advertisements warning of termite danger in a house each time a prospective buyer seems interested? Dell’s statements, and in particular the June 5 presentation by Dell, only convinces us further that the $13.65 price in the pending Michael Dell/Silver Lake deal significantly undervalues the Company. We have also come to the conclusion that a Board that has circulated this information while we were attempting to proceed with our proposed recapitalization (which would allow Dell stockholders the opportunity to retain their Dell shares and to elect to receive a distribution of either $12.00 per share in cash, or $12.00 in additional shares of Dell common stock valued at $1.65 per share), will never accept our proposal as a Superior Proposal as defined in Dell’s February 5 Merger Agreement. As a result, and in order to settle all questions regarding liquidity, we propose that Dell engage in the $14 per share tender offer described below. In order to implement our tender offer proposal we will: (1) seek to defeat the Michael Dell/Silver Lake transaction at the July 18 Special Meeting and we ask you to vote against that transaction as we believe the $13.65 per share purchase price substantially undervalues Dell; and (2) once the Michael Dell/Silver lake transaction is defeated, seek to elect our slate of directors at the 2013 Dell annual meeting of shareholders to implement our proposed $14 per share tender offer.

We propose that Dell commence a tender offer for approximately 1.1 billion Dell shares at $14 per share (for a maximum of $16 billion available in the tender offer). Icahn and Southeastern (who together hold approximately 13% of Dell’s shares) will agree not to tender in the tender offer. Our proposal allows those who believe, like us, that the $13.65 price being offered in the Michael Dell/Silver Lake going private transaction significantly undervalues Dell, to continue to hold Dell shares. It also provides an opportunity for those who wish to tender at $14 a share to do so, with the knowledge that they will be able to sell at least approximately 72% of their position, and possibly more if other shareholders do not fully subscribe to the tender offer.
Funding for the tender offer would be provided from $5.2 billion of debt financing, together with $7.5 billion in cash available at Dell (after taxes and payment of fees) and $2.9 billion available through a sale of Dell receivables. This would leave approximately $4.9 billion of cash available for ongoing Dell operations.

We are proceeding to obtain commitments for $5.2 billion of senior debt financing to be made available to Dell as a bridge loan to guaranty the tender offer and believe that we are on target to achieve that result. A major investment bank has indicated its willingness to make available $1.6 billion and Carl Icahn and his affiliates would make available $2 billion if necessary to facilitate this commitment. To preempt the repetition of the criticisms the Company made regarding our prior plan, we believe the Company will have ample liquidity and capital to make the tender offer and run the business well. The Company’s criticism that we must plan to prepay debt is wrong. Just as most companies do, we believe the Company can pay down debt as it comes due from cash from operations. And since the Company will have $4.9 billion in cash following the tender offer, we see no need to arrange a revolver at this time.

While we have not varied one inch from our plan to raise $5.2 billion in senior debt and to utilize cash and receivables at Dell to fund our recapitalization proposal, Dell has continued to move the goal posts by implying that more cash is required for our proposal to be implemented. The special committee also seems to gloss over the fact Dell’s business generates significant cash flow according to management’s and BCG’s publicly filed plans which have not been changed. It appears to us that the only clear shortfalls at Dell are from poor execution which interestingly occurred during the first half of the year (including starting a PC price war a mere two months before a going-private transaction, granting retention cash bonuses to employees and prepaying debt) and negotiating a high breakup fee in the Michael Dell/Silver Lake deal. We also find it strange that when Quest was purchased in July 2012 it was making $100 million in operating income and now it is suddenly losing $85 million.
We are also announcing today that we have purchased approximately 72 million shares of Dell from Southeastern Asset Management, with proxies to vote at the July 18 Special Meeting. Southeastern continues to be part of our group in opposing the Michael Dell/Silver Lake deal and will share the fees and expenses of the proxy fight on a pro rata basis.

Finally, we have reviewed motions filed against Dell by plaintiffs in their action challenging the Michael Dell/Silver Lake transaction alleging, among other things, inadequacy of the $13.65 per share purchase price, conflicts of interest and breach of fiduciary duty. We have provided the attached letter in support of that action.

We continue to urge Dell shareholders to vote against the proposed Michael Dell/Silver Lake going private transaction at the July 18 Special Meeting.

Very truly yours,

Carl C. 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.

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