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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.


Forum distribution:

Professional views of board committee's buyout rituals


For contemporaneous reports of Dell committee's defensive advocacy of the proposal instead of investor interests in the process discussed by its legal advisor as reported below, see


Source: New York Times DealBook, March 27, 2014 article

Mergers & Acquisitions | Tulane Business Forum

Adviser on Dell Buyout Questions a Tumultuous Process

By MICHAEL J. DE LA MERCED  March 27, 2014, 11:33 am

NEW ORLEANS — By the time the sale of Dell Inc. to its namesake founder was completed last October, the computer company’s board felt like it had been through hell.

Months later, at the Tulane Corporate Law Institute here, one of the advisers to the Dell directors pondered whether the process — one where dissident investors led by Carl C. Icahn nearly derailed the transaction — needed to be so tough.

Jeffrey J. Rosen, a partner at the law firm Debevoise & Plimpton and a counsel to independent members of the Dell board, recounted the numerous steps that directors took to ensure the integrity of their deliberations.

The board ran an unusually open go-shop process that allowed prospective alternative buyers make takeover proposals. Michael S. Dell, the company’s founder and biggest individual shareholder, agreed to neutralize his shares. And JPMorgan Chase, a financial adviser to the independent directors, agreed not to provide financing to Mr. Dell or his partner, the investment firm Silver Lake.

But the board wasn’t prepared for the vigorous challenge presented by Mr. Icahn and the asset management firm Southeastern Asset Management. And the measures that the board had taken weren’t enough to convince many in the market, Mr. Rosen admitted.

It became readily apparent by the summer that the Dell board was facing an uphill battle. Independent directors met with a number of the company’s investors and came in for what Mr. Rosen called “brutal” discussions. Some skeptical shareholders even accused the directors of lying about their intentions to run a fair process.

“I don’t think directors are prepared for the level of shareholder interaction required in this new era,” he said.

Later on, the board’s decision to base success on winning over a majority of shareholders not named Michael S. Dell posed a problem as well. Though the board initially decided that a majority of all independent shares needed to support the deal, the persistent challenge of Mr. Icahn and Southeastern made that standard impossible.

Directors eventually changed the rules so that a majority of independent shares actually voted would carry the day, in exchange for a higher bid from Mr. Dell and Silver Lake. The move drew criticism all the same.

The company sold itself for nearly $25 billion. Mr. Rosen conceded that the process could have been run better — but wasn’t sure what more could have been done.

“How much should a board do to increase the chances of improving an already good deal?” he asked.

Other panelists generally praised the Dell board for its handling of the transaction. To Eileen Nugent, a partner at Skadden, Arps, Slate, Meagher & Flom, the process checked off a lot of boxes that could satisfy corporate governance watchdogs. But that set-up was bound to make life more difficult.

“The deal almost seems designed to be unclear about whether it would happen until the very last minute,”

Michael Carr, Goldman Sachs‘s head of mergers in the Americas, said that the decision to run a go-shop was a no-brainer, with many deals struck these days including one.

“At this point, there’s no choice,” he said. “It’s part of the mosaic of things that you need to put together.”

But Faiza Saeed, a partner at Cravath, Swaine & Moore, questioned the wisdom of the original voting standard. Requiring a majority of all outstanding independent shares in some ways automatically weights the shareholder vote to be against the deal, because investors who don’t vote are regarded as opposing the transaction.

“Majority of the minority sounds good in the abstract,” she said. “But as a board, you’ve got to ask yourself, ‘Does that make sense?’”


Copyright 2014 The New York Times Company


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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