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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.



Note: The reported 23% non-voting Dell shares as of last week compares with 25.1% at the 2011 annual meeting and 26.5% at the 2012 annual meeting (based on the company's SEC reports), indicating that Dell's proxy solicitation efforts persuaded only a small proportion of shareholders to consider the buyout more important than routine matters.


Source: The Wall Street Journal MoneyBeat, July 22, 2013 article





9:07 am
Jul 22, 2013


If Dell Deal Fails, Look Out Below




If the closely watched deal to take Dell Inc. private doesn’t pass, the stock price could be in for an ugly tumble.

Shareholders are scheduled to vote this Wednesday on Michael Dell and Silver Lake Partners’ $24.4 billion buyout offer, after the PC maker delayed last week’s vote, which at the time looked likely to fail. The company and its potential buyers are now trying drum up enough support of the deal through renewed sales pitches.

“By all accounts, it appears the vote to take Dell private will be a nail-biter,” says Chris Whitmore, research analyst at Deutsche Bank.

Should the $13.65-a-share buyout fail, he predicts the stock would fall to about $9.

“If shareholders vote down the deal, we’d expect a proxy fight to ensue and the future of Dell (and its strategy) to become highly uncertain,” Whitmore says.

Shares closed Friday at $13.14 and have traded in the $13-and-$14 range throughout much of the five-month fight for the technology company. “We see roughly 30% downside to Dell’s share price if the deal were to collapse,” he says.

Here’s a look at Dell’s stock price over the past 12 months, including the spike earlier this year after reports initially broke about Mr. Dell’s intentions to take the company private.

Last week, Dell and Silver Lake appeared to fall short of the 751 million shares they needed to win approval. Only about 77% of the eligible shares voted, a turnout low enough to spook the company into adjourning the vote for fear of failure. Since shares not cast count as no votes, the buyout group has targeted a turnout of 85%. Wednesday’s count will come down to whether an additional days of cajoling by the buyout camp is successful at increasing the turnout.

If the proxy solicitors charged with trying to sway holders for Mr. Dell and Silver Lake fail to get out the vote or flip a few key votes to their side, as they appeared to just ahead of last week’s deadline, the vote could be in trouble again.

In addition to the drama surrounding the deal, the fundamentals surrounding Dell’s core PC business look troublesome. “Insights gleaned from Microsoft's recent earnings call paint a concerning picture for medium-term PC corporate demand,” Whitmore says.

For instance, Microsoft last week said about 75% of its installed base has moved from XP and onto Windows 7, “which suggests the low hanging fruit in this corporate PC refresh cycle has been peaked,” Whitmore says.

“The decline of this relatively high margin segment of the PC industry and ongoing tablet/smartphone cannibalization in both the consumer and corporate PC market will likely translate into several years of declining revenue and margin pressure across the PC industry,” Whitmore says.

“With a proxy fight looming in a ‘no’ scenario in the Dell shareholder vote and PC industry fundamentals under considerable strain, we’d think twice before voting against a bird in the hand.”

–David Benoit contributed to this post. 


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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