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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.



An earlier version of this article had been distributed to Forum participants the morning of July 8, reporting only the recommendation of ISS before the other two governance advisors had issued their recommendations.


Source: The Wall Street Journal, July 9, 2013 article and video


TECHNOLOGY  |  Updated July 9, 2013, 2:29 a.m. ET

ISS, Two Others Recommend Dell Buyout

Proxy Adviser: Taking Dell Private Would Make Transformation Faster, Likelier to Succeed


Institutional Shareholder Services said Dell shareholders should vote for an effort to take the computer maker private, a decision that may seal the controversial buyout by Michael Dell. David Benoit reports. Photo: Getty Images.

Michael Dell's controversial plan to take Dell Inc. private won key endorsements on Monday that, if the momentum continues, would put the founder on a track to tackle his next big task: pulling off a revival of the troubled computer maker.

Shareholder adviser Institutional Shareholder Services Inc. as well as Egan-Jones Proxy Services and Glass, Lewis & Co. recommended Dell stockholders vote for a $24.4 billion buyout offer from Mr. Dell and private-equity firm Silver Lake Partners, significantly improving the odds of their deal passing.

ISS, which advises investors how to vote on corporate issues, said the offer to buy Dell shares at $13.65 each "transfers the risk" of transforming the Round Rock, Texas, company into a one-stop-shop for corporations' technology needs, and provides shareholders with "certainty of value."

Some funds say they explicitly follow the recommendations of ISS and Glass Lewis. 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.

While prospects for the buyout have improved, they are by no means assured. Many large shareholders that make their own decisions delay voting on deals until the last minute. One big Dell institutional investor said last week his employer was waiting until just days ahead of the vote to make a decision.

People close to the Dell board committee that negotiated the deal said Monday that meetings with Dell investors are slated to continue this week to pitch them on the merits of the buyout. These people said the Dell special committee also is bracing for the possibility of a new move to try to disrupt the group's offer by investor Carl Icahn, the second-largest Dell stockholder behind Mr. Dell and who has agitated against the deal.

Some buyout opponents are talking to Dell shareholders, and will spotlight flaws they believe ISS made in its analysis of the deal, said a person familiar with the opponents' thinking.

Dell shares rose 3.1% Monday, or 41 cents, to $13.44, the biggest one-day percentage gain since the buyout was announced Feb. 5.

If shareholders bless the deal in a July 18 vote, Mr. Dell must pull off a turnaround that has been rocky so far on his watch. Apart from a nearly three-year gap, Mr. Dell has been chief executive since he founded the company in his college dorm room in 1984.

The buyout group's strategy for a closely held Dell will be to go faster in cutting costs from slumping parts of the company, install fresh management and reshape a sales force that Dell's own advisers have said isn't up to snuff, according to people familiar with its plans.

Analysts say Dell's newer products and services for corporations, the heart of a future Dell, are unprofitable, spotlighting the lack of quick fixes no matter who owns the company. His plan would make him majority owner of a closely held Dell—making him primarily responsible for the success or failure of a turnaround effort.

The to-do list won't be easy, given that an industry slump in personal computers, which are responsible for roughly two-thirds of Dell's revenue, continues apace. If Dell goes private, Mr. Dell and Silver Lake will need continued cash flow from PCs to fund an expansion into businesses with better growth prospects, such as computing-security software and data storage. Research firm IDC just over a week ago forecast second-quarter PC shipments would be worse than its previously expected 11.7% year-over-year drop.



Dell already has provided a glimpse at a potential strategy as a private company: Sacrifice profits to win new business. It slashed prices last quarter on PCs and servers to sign new corporate customers and sell them more services in the future. The strategy resulted in a 41% drop in operating income.

ISS cited worries about the "deteriorating PC business" in recommending the sale. The firm, part of MSCI Inc., criticized Mr. Icahn's proposal to replace Dell's board and help finance a plan for the company to borrow money and give stockholders an option of selling some shares back to the company at $14 each.

ISS said it is unclear whether Mr. Icahn can win enough support for a new board to implement his share-purchase plan.

On Monday, Mr. Icahn and Southeastern Asset Management Inc. said they have support from fellow Dell investors, and again urged investors to vote against the Mr. Dell-Silver Lake buyout. The pair said they "disagree with the ISS voting recommendation…which did not appear to address fair value for Dell's stockholders."

Over the weekend, a person familiar with Mr. Icahn's thinking said he could consider improving his offer, something investors who buy stocks of companies in pending takeovers have pushed him to do. It is unclear if that view has changed.

—David Benoit and Joann S. Lublin contributed to this article.

Write to Shira Ovide at

 A version of this article appeared July 9, 2013, on page B3 in the U.S. edition of The Wall Street Journal, with the headline: Dell Buyout Wins Support From Three Proxy Firms.

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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