Forum Home Page see Broadridge note below]

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 Deal, September 18, 2013 article

The Deal Pipeline

Dell LBO debt deal signals IPO option

by Jonathan Schwarzberg  |  Published September 18, 2013 at 9:01 AM


After his long-fought battle with Carl Icahn, one might think Michael Dell would rest on his laurels and keep Dell Inc. the private, nimble startup he is promising the world. However, buried in the financing details for the nearly $25 billion leveraged buyout, backed by Silver Lake, is a hint that options are being kept open for a return trip to the public markets.

The roadshow for Dell's $3.25 billion bond offering backing its buyout is kicking off this week. The offering includes $2 billion of first-lien seven-year senior notes and $1.25 billion of second-lien eight-year senior notes.

Both tranches have three years of call protection, but the second-lien notes have a clawback that would allow 50% of the notes to be called at par plus half the coupon in case of an initial public offering.

"It's a little unusual because they've just gone private," said Richard Farley, a leveraged finance partner at Paul Hastings LLC.

What the clawback does for Dell is that it will allow it to pay off some of the more expensive second-lien debt if it should decide to go public during the second year following the financing, something that would be appealing to investors reading the company's S-1 filing.

And 50% is high for this type of provision. Most equity clawbacks are set between 30% and 40%, another indication that Michael Dell and Silver Lake are considering the capital structure of the company from all strategic angles.

Argus Research Co. analyst Jim Kelleher said taking Dell private to sort out its financial situation was a good strategy but, at a minimum, this company would need three to five years to even think about going public again. That said, Kelleher did not remember seeing an IPO clawback in other buyout situations recently.

"I don't recall that same sort of detail in some other takeouts," Kelleher said. "But this LBO is so large that it's hard to come up with comparisons."

There is the example of the take-private of Hertz Global Holdings Inc. in December 2005 for $15.6 billion by a private equity group led by Clayton, Dubilier & Rice LLC. The buyout consortium took the company public eleven months later.

The major difference between the Hertz and Dell situations, however, was that the car rental chain was doing well when it went public again. Revenue was up 8%, and Ebitda was up 9% following the buyout.

Dell, on the other hand, is facing a worldwide secular decline of its signature product: the personal computer. PC sales suffered their steepest decline ever in the first quarter of this year, plummeting 14%, according to a survey from International Data Corp.

Dell's Ebitda dropped 22.6% for the fiscal year ending in February 2013 from 2012, according to Bloomberg data. The market had priced the company at under $9 per share in late 2012 before buyout talk began to circulate and the company ended up being sold for $13.75 per share.

"For them to go back public so quickly would be an amazing turnaround," Farley said. "Can these guys really revamp Dell and execute on the business plan that currently contemplates them being private for an extended period of time so fast they'd be filing for an IPO within 18 months? That would be amazing -- I'd say the likelihood of that happening seems low."

What to look for if Dell were planning to go public again quickly are signs that its credit was doing well so that company would be looking to put capital to work, Farley said. In that case, paying down the expensive debt would make sense. "It's a better use of proceeds than a dividend or a sale of equity," he said.

In a tweet following the shareholder vote that will allow him to take his eponymous company private Michael Dell wrote, "Welcome to the world's largest startup!"

And startups, as the world knows from the latest crop of tech companies, like nothing better than to go public. Just look at companies like Google Inc., Facebook Inc. and the soon to be public Twitter Inc. -- the very same companies that put the Dells of the world where they are today.

Dell did not return a call seeking comment on the financing terms.

Credit Suisse Group is leading the notes offering. Joint bookrunners include Barclays plc, Bank of America Merrill Lynch, RBC Capital Markets LLC and UBS. Dell is also arranging a $5.5 billion loan package to finance the buyout.

©Copyright 2013, The Deal.

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.