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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 other views of fair standards for "majority of the minority" voting support, see


Source: New York Times DealBook, July 28, 2013 article

Hedge Funds | Mergers & Acquisitions

Voting Rule Change Is Seen as Crucial to Dell Founder’s Takeover Bid


Kimihiro Hoshino/Agence France-Presse — Getty Images

Michael S. Dell is seeking a change in rules that would not count unvoted shares as “no” votes

A seemingly small concession during the original negotiations over the proposed takeover of Dell by the company’s founder has come into focus in the increasingly protracted deal saga.

Last week, Michael S. Dell and his partner, the investment firm Silver Lake, sought to change the rules for a shareholder vote on their bid for the company. In exchange for a small increase in price — about 10 cents a share, to $13.75 a share — the two have demanded that shares not voted no longer count as “no” votes.

The two prospective buyers have a good reason to call for the change. According to recent tallies, of the roughly 1.1 billion shares that have been cast so far, about 579 million have been cast in favor, while 563 million have been voted against the deal, people briefed on the matter said.

That is not enough to win at the moment, however. According to the current rules set by Dell’s board, a majority of the company’s 1.476 billion shares eligible to be voted must be cast in favor of the deal; that number excludes the 16 percent stake that Mr. Dell holds. So the more than 334 million shares that have not voted yet are treated as no votes.

Mr. Dell and Silver Lake are arguing that the current voting rules adopted by a special board committee set up to evaluate the bid are unnecessarily tough. And with a significant bloc of shareholders, led by the billionaire Carl C. Icahn, firmly opposed to the deal, victory is all but impossible without a change.

Since the prospective buyers announced their demands last Wednesday, the Dell committee and its advisers have been considering whether to accede. Though Mr. Dell and Silver Lake called the slightly sweetened bid their “best and final offer,” directors are pushing for a bigger price increase, to at least $14 a share, one of the people briefed on the matter said.

Time is growing short for a decision, which is expected as soon as Monday. A vote on the deal is scheduled for Friday after having been postponed twice amid tough opposition from shareholders.

Mr. Dell and Silver Lake are in essence trying to take a second whack at an easier voting standard. The two originally pressed to avoid having nonvoted shares counted as “no” votes during the original deal talks, people briefed on the matter said. But the special committee resisted, demanding a higher price before it would consider changing the rules.

At the time, Mr. Dell and Silver Lake agreed to drop the demand. But now they have changed their minds, arguing it to be an impossibly high bar to clear.

Not helping matters is the fact that the rules governing shareholder votes are murky on the issue, legal experts said. Lawrence A. Hamermesh, a professor at the Widener University School of Law, said that Delaware law, which would apply here, simply calls for a majority of a company’s public shares outstanding to be cast in favor of a deal.

“There aren’t any very clear rules, and it generally hasn’t mattered,” Professor Hamermesh said. “You don’t really see it coming up often.”

Much of what has been used in real-life shareholder matters has been tailored more to helping votes stand up to legal challenges. Leonard Chazen, a lawyer at the firm Covington & Burling who is not involved in the deal, said that in the Dell situation, the board appeared to have adopted a standard that was excessive.

“When you’re treating the nonvotes as ‘no’ votes here, that’s going too far, I think,” he said.

But Mr. Icahn and Southeastern Asset Management, who together own more than a 12.5 percent stake, have sharply criticized the effort to change the rules.

“Are they serious?” the two said in a statement last week. “How is it fair to change the rules at the end of the game, particularly when they and their teams of lawyers established the rules?”

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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