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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:

Court hears arguments by lawyers on both sides of Dell appraisal attacking credibility of other side's experts


For the legal briefs presenting the arguments addressed in the hearing reported below, and references to other court decisions and views noted in the article, see


Source: Law360, March 2, 2016 article

Investors Attack Key Expert In Dell Stock Appraisal Fight

By Matt Chiappardi

Law360, Wilmington (March 2, 2016, 9:42 PM ET) -- Dell investors seeking appraisal of their shares from the computer giant's $25 billion go-private deal attacked one of the company’s key expert witnesses in Delaware Chancery Court on Wednesday, saying he “manipulated” data in his valuation analysis so that results came in below the actual transaction price.

During post-trial arguments in Wilmington, Stuart M. Grant of Grant & Eisenhofer PA, attorney for Dell Inc. stockholders who contend the fair value of their shares
should be more than double the price in the $24.9 billion 2013 buyout by founder Michael Dell and private equity firm Silver Lake Partners, contended that the company’s valuation expert essentially crossed the line from expert witness to advocate by producing “litigation-driven forecasts” in his discounted cash flow analysis.

Discounted cash flow analysis, or DCF, is a common method for determining the going-concern value, and thus fair stock worth, for a company when the Chancery Court evaluates the price of a deal, and Grant argues that Dell’s expert, Glenn Hubbard, made unwarranted adjustments to the projection figures used as a basis for his results.

Dell has countered that the shareholders’ own expert failed to update his figures to take several factors into account that weren’t in the company’s financial favor, particularly a sharp decline in the personal computer sales market in 2013.

But Grant argued that the adjustments go beyond mere updates and that they use information Hubbard acknowledged were beyond his expertise, making his report unreliable.

“Those numbers he has are manipulated, altered, not updated,” Grant told Vice Chancellor J. Travis Laster. “His opinion needs to be rejected.”

Hubbard’s work yielded a price-per-share value of Dell of $12.68, more than a dollar lower than the $13.75 deal price.

Petitioning stockholders claim the fair value for their shares is actually $28.61, meaning Dell left $26 billion in value on the table, thanks to the several factors including the company’s burgeoning transformation from one that focused on selling personal computers into one that offers a broader array of technology services. The cost savings that were relied upon for Dell's valuation analysis was actually being reinvested into the company, Grant argued.

Dell returned fire, arguing that it’s the shareholders’ expert, Bradford Cornell, whose analysis should be considered unreliable, because it is based on myriad untested assumptions.

Dell attorney Charles W. Cox of Alston & Bird LLP called the shareholders’ case “preposterous,” casting it as one of theory versus the company’s facts based on reality.

Cox said the shareholders only “focus on what’s metaphysically possible” and that “regardless of the shareholders’ theories in the abstract, they don’t hold up to the facts of the case.”

Dell went through a robust market check, and the special committee vetting the deal negotiated seven price increases before coming to the $13.75 number, he said.

What’s more, Cox argued that the Chancery Court has routinely held to the deal value for a transaction being the fair market value, citing
several recent opinions that found just that including the appraisals of “American Idol” owner CKx Inc., and BMC Software Inc.

Grant pushed back, arguing that deal price is not necessarily the best indicator of value, otherwise there would not be a judicial appraisal process, and that the Dell case was an example of a market anomaly that Michael Dell was able to capitalize on.

The appraisal action was lodged in 2013 by Cavan Partners LP — which held 100 shares, according to court records — and was eventually consolidated with dozens of other shareholders' claims, which went before the Chancery Court for a five-day fact trial in October.

Post-trial arguments in Chancery Court are typically held well after the evidence is presented, and the sides are allowed subsequent briefing. Still remaining to be hashed out is an unusual summary judgment motion in which several large asset manager shareholders, including a T. Rowe Price Associates Inc. fund, are asking Vice Chancellor Laster to temporarily disregard
his ruling in July
in which they technically lost their appraisal rights when they retitled them in the name of the Cede & Co., the Depository Trust Co.'s partner and nominee.

The vice chancellor rendered his ruling reluctantly, writing in an opinion that an approach more closely tied to federal law would be "preferable," but noted he was bound to Delaware law.

Vice Chancellor Laster rendered no rulings Wednesday but did urge the sides to settle, warning that the time for a deal was fast running out.

“This may be your final opportunity to keep your fate in your own hands rather than handing it over to me,” he said.

Dell is represented by Gregory P. Williams, John D. Hendershot, Susan M. Hannigan and Andrew J. Peach of Richards Layton & Finger PA and John L. Latham, Susan E. Hurd, Gidon M. Caine and Charles W. Cox of Alston & Bird LLP.

The petitioners are represented by Stuart M. Grant, Michael J. Barry, Christine M. Mackintosh, Jennifer A. Williams and Rebecca A. Musarra of Grant & Eisenhofer PA.

The case is In re: Appraisal of Dell Inc., case number 9322, in the Court of Chancery of the State of Delaware.

--Editing by Brian Baresch.


© 2016, Portfolio Media, 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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