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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: Wall Street Journal | All Things Digital, September 12, 2013 article

Arik Hesseldahl

ethics statement  |   bio

Dell Shareholders Approve $25 Billion Buyout to Go Private

September 12, 2013 at 7:15 am PT



Michael Dell and the private equity firm Silver Lake have prevailed in their 14-month-long effort to convince shareholders in the computing company Dell to take the company private in a leveraged buyout.

The results of a shareholder vote were just announced moments ago at a special meeting of shareholders in Round Rock, Texas. The final vote tallies haven’t been released yet, but CNBC, citing sources familiar with the result, have pegged the vote in favor at 65 percent to 35 percent. A final tally will be read out a little later as the meeting is still underway.

The final buyout price is $13.75 share and includes a 13-cent a share special dividend for a total price of $13.88, or $24.9 billion. The deal also guarantees an eight cent per share quarterly dividend when Dell next reports earnings in November.

The vote brings to an apparent close a rancorous process during which numerous Dell shareholders lined up to oppose Dell and Silver Lake.

The process began in June of 2012 when the investment firm Southeastern Asset Management, a longtime Dell investor and until recently its numbers two shareholder, first contacted Michael Dell about the possibility of going private. Dell held his first conversations with people from Silver Lake at an technology industry conference in Aspen, Colo. the following month.

Ironically, Southeastern became one of the leading voices in opposition of the transaction that ultimately emerged. Soon the activist investor Carl Icahn had picked up the torch, and bought out much of Southeastern’s stake, and became Dell’s number two investor after Michael Dell himself.

Icahn and Southeastern proposed their own alternative transaction, which they described as a structured recapitalization. Under their plan, they would have bought up 72 percent of Dell shares and left the remaining stake as a publicly traded stub. They further proposed to take on new debt and to pay a special dividend to shareholders and to issue warrants for the purchase of additional shares within a seven-year window. They argued that the Dell-Silver Lake proposal undervalued the company and locked out current investors from benefiting from any future turnaround of the company that might occur.

For months the wrangling between them threatened to result in a split board of directors and a prolonged proxy fight for control of the company as neither side had sufficient support among shareholders to take full control.

Icahn took his fight against the transaction public both via numerous open letters to shareholders, and to his relatively new Twitter account where at times he needled Dell management with labored verse.

Earlier this week, Icahn conceded that he had lost the battle to take control of Dell. However he has said he intends to ask a court in Delaware to appraise the company’s value in hopes of forcing a higher payout. Given the size of his holdings, Icahn has already realized a $70 million profit on his Dell shares.

The company has been struggling with the long-term decline in the personal computer business while at the same time trying to transform itself into a bigger player in enterprise hardware, software and services. But those efforts at transformation have been uneven and the majority of Dell’s revenue is either derived either directly from PCs or from ancillary products like desktop displays and and accessories.

The press release confirming the deal just crossed the wires. Here it is:

Dell Stockholders Approve Merger Transaction


Dell today announced that, based on a preliminary vote tally from the special meeting of stockholders, Dell stockholders have approved the proposal in which Michael Dell, Dell’s Founder, Chairman and CEO, will acquire Dell in partnership with global technology investment firm Silver Lake Partners.

In connection with the transaction, Dell stockholders will receive $13.75 in cash for each share of Dell common stock they hold, plus payment of a special cash dividend of $0.13 per share to stockholders of record as of a date prior to the effective time of the merger, for total consideration of $13.88 per share in cash. The agreement also guarantees the regular quarterly dividend of $0.08 per share for the fiscal third quarter would be paid to holders of record as of a date prior to closing. The total transaction is valued at approximately $24.9 billion.

The preliminary vote tally shows that the transaction was approved by the holders of a majority of Dell’s outstanding shares, as required by Delaware law. In addition, the tally shows that the transaction was approved by the holders of a majority of Dell’s shares voting for or against the matter, excluding shares held by Mr. Dell, certain of his related family trusts, Dell’s Board of Directors and certain members of its management, as separately required under the merger agreement.

“I am pleased with this outcome and am energized to continue building Dell into the industry’s leading provider of scalable, end-to-end technology solutions,” said Michael Dell, chairman and CEO of Dell. “As a private enterprise, with a strong private-equity partner, we’ll serve our customers with a single-minded purpose and drive the innovations that will help them achieve their goals.”

Mr. Dell continued, “I would like to thank our 110,000 team members around the world who, throughout this process, have remained focused on serving our customers with unity, purpose and pride. As our company continues to expand its enterprise solutions and services business, our team members will be Dell’s most valuable asset and the key to our future success.”

“Over the course of more than a year, the Special Committee and its advisors conducted a disciplined and independent process to ensure the best outcome for Dell stockholders,” said Alex Mandl, chairman of the Special Committee formed to evaluate the transaction and other strategic alternatives. “By voting in favor of the transaction, the stockholders have chosen the best option to maximize the value of their shares. I want to thank my fellow Committee members and the entire Board for their diligent and tireless efforts on behalf of Dell stockholders, and the stockholders themselves for the careful consideration they gave to this important matter.”

The transaction is expected to close before the end of the third quarter of Dell’s FY2014, subject to the satisfaction of customary closing conditions, including regulatory approval. Dell will continue to be headquartered in Round Rock, Texas.




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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