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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 an example of a board's failure to effectively address the evolving investor views of fair pricing reported in the article below, see


Source: The Wall Street Journal, August 7, 2013 article


TECHNOLOGY  |  August 7, 2013, 7:47 p.m. ET

Friendly Deals Get Testier

Shareholders Are Shaking Up Takeover Attempts, Demanding Higher Prices Even When No Alternative Suitor Is Offering One




Friendly deals and hostile takeovers have been part of the Wall Street deal landscape for decades. But recently a hybrid is emerging in which friendly deals face hostility—from shareholders demanding more money.

In what has become a new sort of takeover battle, shareholders are shaking up deals, demanding higher prices for their companies even when no better bid is guaranteed.

Amid this shareholder agitation, would-be acquirers recently have been compelled to bump up or otherwise improve their offers in several big deals, including the pending leveraged buyout of Dell Inc. and Deutsche Telekom AG's deal for U.S. wireless carrier MetroPCS Communications Inc.

"It used to be that you'd pop the champagne corks upon a deal announcement. Now you white-knuckle it through the shareholder vote," said Chris Young, who heads the so-called contested-situations practice for Credit Suisse Group AG, which focuses on activist investors.

Boosting Bids

Deals this year that saw bumps amid shareholder opposition



Mr. Young has a name for situations where it is the shareholders, not the buyers or sellers, who are unhappy: the "contested-friendly deal."

Investors' stronger pushback on mergers and acquisitions is the latest manifestation of the broader rise of shareholder activism, in which investors typically agitate for changes to increase share prices through moves ranging from operational tweaks to selling the entire company. Recent post-merger-agreement skirmishes with investors have involved both longtime shareholders and shareholders who snapped up a stock after a deal was struck and then pushed for a better price.

The rise of activism around deals adds another risk factor for chief executives and boards when weighing whether to sign a deal, and it could mean companies shy away from deals or take additional steps—such as more thoroughly seeking a wider swath of buyers—to help ensure the deal gets done.

For shareholders, the trend could mean bigger payouts when companies are sold but also may mean fewer deals get struck.

"One thing is certain: Shareholder approval in the absence of an interloper can no longer be taken for granted," said Ken King, a deal lawyer at Skadden, Arps, Slate, Meagher & Flom LLP.

Concerned about shareholder reaction, companies are doing more before a deal is signed to pre-emptively gauge the composition of their shareholder base and investors' likely response to an agreement, bankers and deal lawyers say.

Once a deal is struck, firms reach out quickly to investors, rather than wait until closer to the time of the shareholder vote, they say.

"Boards of directors and management teams are becoming more and more mindful of the need to 'sell' a deal from the outset of its announcement," Mr. King said.

Deal makers say they also are weighing different tactics to head off shareholder opposition.

Among them: cutting some deals where buyers go directly to shareholders to buy shares through "tender offers," rather than striking a deal that requires the company being sold to make a public filing that details negotiations and rationale for a deal, followed by a shareholder vote.

A change in Delaware law that went into effect Aug. 1 also will make it easier for firms to execute all-cash deals through a tender offer.

Companies can now sell themselves through a tender offer if more than half of shareholders agree to sell their shares; previously the law required that 90% sign off. The approach wouldn't work in deals that require extra time to clear regulatory hurdles or secure financing because tender offers must be done in a short time frame.

Investors have prodded buyers into richer offers in years past in the absence of a competing bid. And some deals that have faced shareholder resistance this year have distinguishing features that made them ripe for opposition. The Dell deal, for instance, involves a management buyout, an often contentious move.

At the same time, some deal makers say, agitation by shareholders in a string of several big deals along with the rise of activism broadly have chief executives, their boards and advisers taking notice.

And some don't mind what they see. Executives and directors are beginning to change their views on shareholder resistance to deals, seeing it as less of a problem than it used to be, said Paul Parker, head of global corporate finance and M&A for Barclays PLC.

Boards are "putting a deal out there and letting the shareholders decide," Mr. Parker said. "They are willing to say, 'If it gets attacked and someone can create a higher value, that's OK.'"

After Clearwire Corp. agreed in December to be sold to then Sprint Nextel Corp., now known as Sprint Corp., for $2.97 a share for the shares Sprint didn't own, investment firm Crest Financial Ltd. came out against the deal. Sprint also faced a challenge from pay-TV provider Dish Network Corp., which topped Sprint's offer, eventually offering $4.40 in a tender offer. Clearwire came out in support of that offer, then Sprint eventually agreed to pay $5 a share for Clearwire, an increase of $1.2 billion over the initial bid.

Mr. King said that since no recent deal has collapsed after shareholders agitated for a higher price, shareholders are emboldened to push for more.

Greeting-card company American Greetings Corp. also encountered shareholder resistance in its plan to sell the company to its controlling family. TowerView LLC, a fund run by former Salomon Brothers executive Daniel Tisch, argued that the Weiss family—descendants of the Polish immigrant who founded American Greetings in the early 1900s—should buy back shares to improve the company's stock price, rather than take the company private, as they proposed last September.

TowerView said in public filings that the company could be worth close to $29 a share, versus the $17.18 the family first offered to pay for the portion of the company it doesn't already own.

The Weiss family eventually raised its offer to $19 a share, a bump of around $80 million. TowerView remained opposed to the deal at the higher price. Investors "want to make sure they are getting a fair deal," Mr. Tisch said earlier this week.

On Wednesday, they approved the deal at $19.

—Shira Ovide contributed to this article.

Write to Sharon Terlep at

A version of this article appeared August 8, 2013, on page C1 in the U.S. edition of The Wall Street Journal, with the headline: Friendly Deals Are Getting Testier.

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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