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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.



Source: The Wall Street Journal, August 9, 2013 article


LAW  |  August 9, 2013, 5:20 p.m. ET

Icahn, Dell Head to Court Over Shareholder-Voting Changes




WILMINGTON, Delaware—A Delaware corporate-law tribunal is expected on Monday to fast-track Carl Icahn's legal challenge to Michael Dell's buyout deal for Dell Inc., setting up a potential showdown between the two billionaires over their competing visions for the computer giant.

Mr. Icahn has asked Chancellor Leo Strine of Delaware's Court of Chancery to force Dell to hold simultaneous votes on the almost $24.8 billion buyout offer from Mr. Dell and Silver Lake Capital and on Mr. Icahn's attempt to set the stage for a competing offer. The activist investor says Dell rigged the voting against his bid to replace Dell's board with directors sympathetic to his proposal for a leveraged recapitalization of the computer maker.

Mr. Icahn is arguing that recent changes to voting rules have robbed the company's shareholders of the right to choose between the dueling deals. Dell, meanwhile, says Mr. Icahn's lawsuit is "just another soapbox" to publicize his fight with the special committee of the company's board that is putting the offer from Mr. Dell and Silver Lake to a shareholder vote.

The issue up for decision Monday is how fast the case will move. With a shareholder vote set Sept. 12 on the buyout bid from Mr. Dell and Silver Lake, the financing for Mr. Icahn's rival offer set to expire Sept. 30, and Dell's board vote set for Oct. 17, Mr. Icahn argues that failure to get a speedy hearing on his challenge could be fatal his legal case.

Chancellor Strine could move the case along quickly or let the deal action play out and leave Mr. Icahn to pursue his remedies after the fact. Delaware courts are reluctant to interfere in shareholder votes, but the question of whether the shareholder-voting changes are fair is one the judge may want to tackle in advance, observers say. They also expect the market is right in betting that Mr. Dell's deal for the computer company he founded will survive the legal attack, unless new facts turn up.

"When dealing with voting rights like this, I'd be stunned if [Chancellor Strine] didn't just say, 'Let's cut to the chase and get this scheduled,'" said Lawrence A. Hamermesh, professor of corporate and business law at Widener University's Institute of Delaware Corporate Law.

Don't expect earthshaking pronouncements Monday, Mr. Hamermesh said, but do look for an important decision soon on a "troublesome area" of corporate law: how much power do boards have to change the rules on a shareholder vote?

The Dell special committee recently moved the record date—the date which determines which shareholders are entitled to vote—to Aug. 13 from June 3. The special committee also removed a requirement that Mr. Dell's buyout offer be approved by holders of a majority of the shares outstanding. Instead, a deal advances if it gains approval of a majority of the votes actually cast. So Mr. Dell's offer could be approved without winning a majority of shares outstanding—if large numbers of shares aren't voted.

The company says the voting changes, allowing shareholders to consider a recent $350 million improvement in the buyout offer, were appropriate.

Delaware, the legal homeland of thousands of major corporations, holds shareholder voting rights sacred and has invalidated board decisions that interfere with them unfairly, requiring a "compelling justification," such as the need to weigh material new information.

Mr. Icahn says the special committee, in essence, delivered Dell into the hands of deal arbitrageurs, short-term investors who jump into a stock as it heads toward a deal and jump out just as fast. The new voting record date gives voting rights to so-called arbs and other late buyers of the stock, while the tally rule change amplifies the effect of the arb votes in that it will take only a majority of shares voted for the buyout to pass. According to Mr. Icahn, that unfairly dilutes the votes of long-term investors who care about Dell's future—too high a price to pay for a small improvement in the buyout price.

In Dell, it will come down to whether the board's special committee had the right advice and the right motives for changing the record date, Mr. Hamermesh said. "Are they biased or genuinely trying to pursue a course of action that places the voting rights in the right hands? It's all about whether the board is promoting voting rights appropriately or impairing them."

If Dell's decision to change the voting rules passes muster, deal makers get clarity in a murky area and an important tool to push shareholders toward a deal the board endorses, said Hunton & Williams LLP's Steven Haas, a mergers-and-acquisitions practitioner who has written on the issue of board power.

"Within the M&A bar you usually have one high-profile deal every two or three years that is so significant everyone is watching," Mr. Haas said. The fight over Dell, he said, is one of those cases.

In a 2007 ruling, Chancellor Strine suggested the "compelling justification" standard for changing voting rules should be eased to allow boards to abide by their duties to screen deals and let shareholders know what they think. That decision wasn't appealed to the Delaware Supreme Court, but the ruling in Dell, whatever it is, may well be, Mr. Haas said.

That is another reason for thinking Mr. Icahn's lawsuit will get onto the fast track: if Chancellor Strine clears the voting changes and Mr. Dell and Silver Lake win the vote and complete the buyout, it could be tough to undo the deal if the state's high court ultimately reverses the ruling.

What of the arbs, the fast-buck artists of the investing world? Will their presence convince Chancellor Strine that the effect of the changed voting schedule, as Mr. Icahn contends, will be to allow short-term profiteers to decide Dell's fate?

Probably not, said Mr. Haas. Chancellor Strine "is going to be reluctant to craft any kind of a holding around the assumption that certain investors are always going to behave a certain way," Mr. Haas said.

Mr. Hamermesh agrees.

"Arbs are stockholders. People buy shares for long-term and short-term reasons, and we don't distinguish between the voting rights of someone who bought recently and someone who bought a long time ago," he said.

Write to Peg Brickley at


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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.

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