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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.



The article below was published in Agenda, a Financial Times private subscription service for corporate directors, and is presented with permission.


Source: Financial Times Agenda, August 5, 2013 article

Dell Special Committee Put In Focus

By Ian Thomas August 5, 2013

The first action taken by Dell’s board of directors upon hearing CEO Michael Dell’s proposal to take the company private last year was to set up a special committee to vet the deal. Now, almost a year later, that committee is in the middle of what continues to be a fierce poker game between Michael Dell, activist investor Carl Icahn and the board itself.


The committee, led by Alex Mandl, announced on August 2 it had reached a revised agreement with Michael Dell and Silver Lake Partners over a buyout of the company. Under the terms of the new deal, the CEO’s consortium would pay $13.75 and a special dividend of 13 cents per share, in exchange for the special committee’s acceptance of a change to the voting rules and adjourning a vote until September.


The committee did not return requests for comment.


Icahn, a fervent opponent of the deal, had sued Dell in Delaware’s Court of Chancery on August 1 to prevent such changes.


While this is just the latest turn in what has become an extremely tumultuous buyout process, the recent actions of the committee have begun to raise questions around some of the committee’s decisions, says Gary Lutin, chairman of the Shareholder Forum, an investor advocacy group.


“The job of the special committee is to run a fair auction, and it can’t do that if the committee becomes part of the bidding process themselves and negotiates openly,” says Lutin. “At times the committee sounds more like Carl Icahn than Icahn does.”


Lutin says that part of the problem may be that the committee has focused on satisfying the ritual requirements for not breaching duty in the process, and has not paid enough attention to its fiduciary duty to shareholders.


One of those requirements has been the recently discussed majority-of-the-minority voting requirement, which Michael Dell had requested be altered in the latest rejected proposal.


Under this rule, the merger would not be approved unless it received a favorable vote from a majority of the outstanding shares other than shares owned by the Michael Dell group.


However, Leonard Chazen, senior counsel at Covington & Burling, says this sort of regulation was not legally necessary, and has actually allowed the proxy fight to continue.


“The majority-of-the-minority clause in the Dell merger agreement left Michael Dell fighting Icahn with one hand tied behind his back,” says Chazen. “Dell had his shares neutralized, while Icahn, who had proposed a competing transaction, was free to vote against the Dell offer. Icahn made the most of his tactical advantages.”


Chazen says that Michael Dell’s stock ownership, which sits at about 15%, is far below the level at which he would be considered a controlling stockholder. Under current Delaware law, his level of ownership would only subject his proposal to the business judgment rule rather than being reviewed for its “entire fairness” if it is approved by the committee and a majority of the shares not owned by the controlling stockholder.


“It’s understandable why the committee had considered this sort of rule, especially as a declaration of fairness,” says Chazen. “However, when you have this sort of organized opposition with a willingness to put a competing deal on the table, you begin to question if this type of majority-of-minority vote was right.”


Chancellor Leo Strine of Chancery Court, who declined a request by Icahn and other investors to block the deal in June, had previously granted summary judgment to M&F Worldwide in May 2013, finding that the board did not breach its fiduciary duty when it accepted an offer by the company’s largest shareholder.


In the ruling, Strine wrote that companies that subject going-private deals to the scrutiny of both an independent board committee and a vote of minority shareholders will have an easier time fending off litigation challenges.


In a letter to Dell’s shareholders, Icahn wrote, “Proper protection for stockholders of Dell should not be offered for sale to anyone at any price.” Icahn also called for the annual meeting of stockholders to take place at the same time as the vote on the merger, which would allow investors to vote for his proposed slate of directors.


Lawrence Hamermesh, a professor of corporate and business law at the Widener University School of Law, says that while the M&F Worldwide case does provide precedence for Dell to continue to proceed with minority stockholder vote conditions, directors should take a much closer look at how they work when constructing and looking at strategic alternatives.


“If initial reports would show that 40% of the publicly held shares would want a deal, 35% of shareholders wouldn’t want it, and another 25% of shareholders are just not interested enough either way, what should the director be trying to do? It almost answers itself,” says Hamermesh.


Hamermesh says he doubts the court would take a negative view toward Dell’s special committee if it were to accept a change to the vote structure at some point. In that scenario, Michael Dell still wouldn’t hold enough of a controlling stake and the change wouldn’t be any less protective of the minority vote.


Chazen says that with activist investing on the rise it is important for directors whose companies are being targeted for a buyout to try to anticipate any opposition that could occur down the road.


“Boards or special committees should always look to rules that don’t [give] the purchaser the ability to use their voting power to force through a buyout or a transaction,” says Chazen. “But they also have to be cognizant of giving the opponent of a transaction an unfair advantage.”


An Information Service of Money-Media, a Financial 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.

Inquiries about this project and requests to be included in its distribution list may be addressed to

The information provided to Forum participants is intended for their private reference, and permission has not been granted for the republishing of any copyrighted material. The material presented on this web site is the responsibility of Gary Lutin, as chairman of the Shareholder Forum.

Shareholder Forum™ is a trademark owned by The Shareholder Forum, Inc., for the programs conducted since 1999 to support investor access to decision-making information. It should be noted that we have no responsibility for the services that Broadridge Financial Solutions, Inc., introduced for review in the Forum's 2010 "E-Meetings" program and has since been offering with the “Shareholder Forum” name, and we have asked Broadridge to use a different name that does not suggest our support or endorsement.