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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:

Recollections of stories people believed about Dell value when buyout was priced in 2013


Source: The Wall Street Journal | MoneyBeat, October 12, 2015 article



5:38 pm ET
Oct 12, 2015 


Dell’s Value and the ‘Falling Knife’


By David Benoit

Michael Dell — Bloomberg News

Michael Dell and Silver Lake appear to have handled that “falling knife” they were trying to catch in 2013 pretty well.

Don’t expect some shareholders of the old Dell Inc. to applaud the feat.

The now-private company’s equity value has roughly doubled since the $25 billion buyout closed in late 2013, according to people familiar with the matter. And now, Dell is buying EMC Corp. for $67 billion in the largely pure technology deal in history.

That’s a far cry from the situation just two years ago, when Institutional Shareholder Services Inc. said Mr. Dell was “trying to catch a falling knife” with the deal. And it’s not likely to sit well with the shareholders who fought the Dell buyout as too cheap, including Southeastern Asset Management and Carl Icahn.

Southeastern, Dell’s largest outside shareholder when the deal was announced, led the charge against the buyout. The asset manager argued that Dell was worth $24 a share, more than $10 over the $13.65 offer (which was later increased to $13.75.) The fund had once approached Mr. Dell about helping fund a buyout itself, according to filings, then found itself on the outside.

After Southeastern spoke up, Mr. Icahn purchased a large stake and launched a campaign against Mr. Dell and the company’s board, saying the deal essentially amounted to a theft of the company from public shareholders. The Dell buyout was the first subject of Mr. Icahn’s Twitter account, which has since grown to a stock-moving sounding board for the activist.

Southeastern declined to comment Monday. Mr. Icahn wasn’t immediately available to comment.

Mr. Dell and his board argued that the company’s business was receding, pointing out their frequent inability to hit internal forecasts and the broad decline in the personal computer business. The plan, Mr. Dell said, was to pivot to enterprise offerings, away from consumer customers, out of the spotlight of public earnings.

Southeastern and Mr. Icahn didn’t disagree with that plan. But they argued the buyout was unfairly shortchanging shareholders, who were getting a premium of about 25% over where Dell shares were trading before the deal was reached. They also said the company was emphasizing a struggling PC business in order to keep the price down, even as it was moving away from PCs.

Of course, those that argued that Mr. Dell and Silver Lake were accounting for risk in the 2013 buyout are unlikely to change their argument today because of their success. Instead, they would likely credit their execution of the turnaround.

Some of Dell’s old shareholder continue to fight the buyout, taking the deal to court to try to get a judge to rule their shares were worth more. Neither Southeastern nor Mr. Icahn is involved in the appraisal lawsuit. The Dell appraisal trial ended last week and is awaiting a judge’s decision.

What do the appraisal-seekers think Dell was worth at the time of the buyout? Roughly double.


Copyright ©2015 Dow Jones & Company, Inc.


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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