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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 commentary below addresses questions raised about the fairness of recently evolved "majority of minority" voting practices, particularly concerning the unintended imbalance favoring one proponent over another in a proxy contest. For other legal and investor views of voting standards, including linked references to other recent comments and analyses, see


Source: The Wall Street Journal MoneyBeat, August 15, 2013 commentary





8:36 am
Aug 15, 2013


Dealpolitik: Common Sense Approach to Dell’s Voting Fight




On Friday the Delaware Chancery Court is scheduled to hold a hearing on Carl Icahn’s challenge to two changes to the shareholder vote in the Michael Dell/Silver Lake buyout.

I don’t see him prevailing. Here’s why.

For the Michael Dell/Silver Lake buyout to pass muster it must meet two different thresholds in terms of a shareholder vote. The first is a statutorily required vote: a majority of the outstanding shares must vote in favor of the deal. Shares controlled by Mr. Dell are counted in this vote. If the majority don’t vote in favor, the deal is dead.

The second threshold is solely a condition contained in the merger agreement. It is sometimes referred to as the “majority of the minority” vote—but that is really a misnomer. In this situation, it is a vote of a majority of the 84% of the shares not controlled by Mr. Dell. Dell’s special board committee insisted on this vote as additional protection for shareholders given Mr. Dell’s role in the company. In the renegotiated deal, the special committee has decided that a bit more permissive voting standard is appropriate. That change is one of the things being challenged by Mr. Icahn.

The new standard changes the treatment of shares that aren’t voted. In the first merger agreement, these share were treated as “no” votes. In the new deal, the no shows aren’t counted for or against—they are treated like Mr. Dell’s shares. All that is necessary to pass the merger is a majority of the shares (other than Mr. Dell’s) actually voted.

Here is how the special committee describes its reasoning for changing this voting standard in its proxy filing Wednesday:

“the original voting standard was set at a time when the decision to be made by the stockholders at the special meeting would have been between a going-private transaction and remaining a public company, but since then the nature of the choice facing stockholders had changed because of the emergence of an alternative proposal by Icahn Enterprises and Southeastern who held a substantial number of shares included as unaffiliated. In the context of the current decision to be made by stockholders, the Special Committee concluded that it did not believe it was appropriate to count shares that have not been voted as supporting any particular alternative for purposes of the unaffiliated vote condition.”

Also, because of an arcane and outdated concept of a “record date,” a snapshot of the shareholders was taken on June 3 under the original deal and only those investors who owned shares on that date would have been able to vote. Thus, former shareholders who sold after June 3 would have been able to vote even though they have no economic interest. Shareholders who bought after June 3 got no vote. The new deal changes all of that; as long as shareholders bought shares by Tuesday of this week, they get to vote.

Icahn is attacking the changes regarding the non-votes and record date. His main argument is that it is unfair to change the rules in the middle of the game. And he is right that rule changes in the middle of a fight need extra scrutiny.

Nevertheless, under these circumstances, neither of the changes offends common sense. If shareholders don’t care enough one way or the other to express their vote, why should their vote be treated in the “no” column, particularly where, as the Dell Special committee points out, the shareholders have alternatives to choose from?

As for the record date issue, this doesn’t look like a situation in which the board has manipulated the record date—with all of the delays (which admittedly include delays by the company to see if it can turn out a larger vote), why shouldn’t those who purchased shares in the last couple of months get to vote rather than people with no stake in the company? Indeed the Delaware corporate statute itself requires the resetting of the record date if it is more than 60 days prior to the meeting in the absence of the company jumping through some procedural hurdles.

It seems hard to conclude that these rule changes are unreasonable under these circumstances.

That leaves Icahn arguing that the court should force Dell to have a vote on his directors at the same time they vote on the merger. As I have pointed out previously in this column, if similar voting rules were applied to the two matters, he and I would agree that might be a better way to proceed. But there is no requirement that the Dell directors hold such a simultaneous vote. The board concluded it was better to proceed with the meeting on the buyout first. It doesn’t make sense for a court to disrupt that decision, since Delaware law entrusts the board to make it.

It is true that Delaware law provides that “if no date has been designated, for a period of 13 months after the latest to occur of the organization of the corporation, its last annual meeting or the last action by written consent to elect directors in lieu of an annual meeting, the Court of Chancery may summarily order a meeting to be held.” But the board has designated such a date and it is October 17.

The board’s decisions may favor the Michael Dell/Silver Lake deal. But that doesn’t make their decisions improper.


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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