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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 reference:

Dell's counsel reviews facts and principles established by court decision about fund manager's voting error in appraisal claim


For the decision analyzed below by one of the firms that represented Dell in the motion, see

Note: The decision addresses voting of 31,052,130 Dell shares in 14 mutual fund and pension accounts managed by T. Rowe Price, each of which is identified on page 20 (PDF p.21) of the Opinion. In a previous July 13, 2015, Memorandum Opinion in the same case, the court determined that an additional 922,975 shares in 5 other accounts managed by T. Rowe Price were made ineligible for appraisal rights by administrative errors in the maintenance of continuous ownership. According to a July 30, 2015 court submission (footnote #1 on  page 1 of the Brief in Support of Motion; PDF p.10), only one of the accounts managed by T. Rowe Price, the Morgan Stanley Defined Contribution Trust with 357,500 shares, remains eligible for appraisal as a result of the fund manager having failed to process any voting instructions for the account.

Court records addressing both the voting and ownership errors can be found in the "Entitlement to Appraisal Rights" section of the Dell project's reference page.


Source: Richards, Layton & Finger, PA, May 12, 2016 commentary


In re Appraisal of Dell Inc.: Delaware Court of Chancery Provides Guidance on "Dissenting Stockholder" Requirement

May 12, 2016

In In re Appraisal of Dell Inc., C.A. No. 9322-VCL (Del. Ch. May 11, 2016), the Court held that fourteen mutual funds sponsored by T. Rowe Price & Associates, Inc. (“T. Rowe”) as well as institutions that relied on T. Rowe to direct the voting of their shares (the “T. Rowe Petitioners”) were not entitled to an appraisal of their shares of Dell Inc. in connection with Dell’s go-private merger, because the record holder had voted the shares at issue in favor of the merger, thus failing to meet the “dissenting stockholder” requirement of Section 262 of Delaware’s General Corporation Law. The T. Rowe Petitioners held their shares through custodians. The custodians, however, were not record holders of the shares; they were participants of the Depository Trust Company, which held the shares in the name of its nominee, Cede & Co., which, for purposes of Delaware law, was the record holder. As the record holder, Cede had the legal right to vote the shares on the Dell merger and to make a written demand for an appraisal of the shares.

The Court noted that, through a “Byzantine” system, Cede was constrained to vote the T. Rowe Petitioners’ shares in accordance with T. Rowe’s instructions. Although T. Rowe had publicly opposed the merger, due to its internal voting processes, it had in fact submitted instructions to vote the T. Rowe Petitioners’ shares in favor of the merger. To assist in its voting processes, T. Rowe had retained Institutional Shareholders Services Inc. (“ISS”). On matters on which a stockholder vote was sought, the voting system generated default voting instructions. In the case of management-supported mergers, such as Dell’s merger, the default voting instructions were to vote in favor of the merger.

The special meeting of Dell’s stockholders to vote on the merger was originally scheduled for July 18, 2013. For that meeting, T. Rowe confirmed that its shares were to be voted against the merger. Dell opened the July 18 meeting for the sole purpose of adjourning it. After a series of subsequent adjournments, the special meeting was held on September 12, 2013. Shortly before the meeting, the voting system generated a new meeting record, which had the effect of replacing the prior instructions (i.e., “against”) with new default instructions (i.e., “for”). After the switch, no one from T. Rowe logged into the ISS system to check the status of its voting instructions. As a result, the T. Rowe Petitioners’ shares were voted in accordance with the new default instructions—that is, they were voted in favor of the merger, a fact that came to light after certain of the T. Rowe Petitioners submitted filings required by federal law disclosing their vote.

Section 262 of Delaware’s General Corporation Law confers appraisal rights upon a stockholder of record who holds shares on the date an appraisal demand is made, continuously holds the shares through the effective date of the merger, submits a demand for appraisal in compliance with the statute, and has not voted in favor of the merger or consented to it in writing. The Court noted that Section 262’s requirements could be read as “all-or-nothing propositions,” such that a stockholder of record, like Cede, would be foreclosed from asserting appraisal rights if it voted a single share in favor of the merger. The Court observed that the Delaware Supreme Court, recognizing that a broker or nominee may hold shares of record on behalf of multiple clients, has permitted a stockholder of record to split its vote and seek appraisal for shares not voted in favor of the merger. The key consequence of such vote splitting, the Court stated, is that a record holder can only seek appraisal for the specific shares that were not voted in favor of the merger. The key consequence for the T. Rowe Petitioners is that their shares held of record by Cede, having been voted in favor of the Dell merger, were not entitled to appraisal rights.

In arriving at its holding, the Court noted that language in several of its recent “appraisal arbitrage” opinions, if read literally, would preclude it from considering anything other than Cede’s aggregated votes on the merger. The Court stated, however, that there was no evidence in those cases regarding how the particular shares were voted. The Court concluded that the appraisal arbitrage cases deal only with the situation involving the absence of proof; they do not stand for the proposition that, where evidence as to how the shares were voted exists and the parties can introduce it, the Court is precluded from considering it.

The Court’s solution was to provide that, once an appraisal petitioner has made out a prima facie case that its shares are entitled to appraisal (which, where the shares are held of record by Cede, it can meet by showing that there were sufficient shares held by Cede that were not voted in favor of the merger to cover the appraisal class), the burden shifts to the respondent corporation to demonstrate that Cede actually voted the shares for which appraisal is sought in favor of the merger. The Court noted that the corporation could introduce public filings or other evidence from providers of voting services, such as internal control numbers and voting authentication records. If the corporation demonstrates that Cede (or any other record holder) actually voted the shares for which appraisal rights have been asserted in favor of the merger, the requirements of Section 262 will not have been met, and the petitioner will not be entitled to an appraisal of those shares.

Related Files

Read the Opinion: In re Appraisal of Dell Inc.


© 2016 Richards, Layton & Finger, PA


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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