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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 considers "fair value" defined by market pricing, eliminating appraisal as protection from opportunistic buyouts


For the full decision reported below, see

Note: An updated version of this article, adding commentary and eliminating the original's reference to the court decision's controversial endorsement of "efficient market hypothesis" as a basis for valuing companies, was published later on December 14, 2017, after distribution of the version below to Forum participants.


Source: Reuters, December 14, 2017 article

#Business News    December 14, 2017 / 12:10 PM

Court reverses Dell buyout ruling that alarmed dealmakers

Tom Hals

WILMINGTON, Del. (Reuters) - Delaware’s Supreme Court ruled on Thursday that a lower court erred in finding that the 2013 buyout of computer maker Dell Inc was vastly underpriced, a ruling that had allowed hedge funds to wring extra cash from the deal.

A Dell logo is seen in this illustration picture taken in Sarajevo, Bosnia and Herzegovina, October 12, 2015. REUTERS/Dado Ruvic

The judge on the Court of Chancery abused his discretion by not giving weight to the deal price of $24.9 billion, or $13.75 per share, as evidence of the fair value of the company, the Delaware Supreme Court said.

Thursday’s ruling stems from what is known as an “appraisal” lawsuit in which investors who oppose a merger ask a judge to determine the fair value of the stock.

Wall Street dealmakers have warned that appraisal has become an investment strategy for sophisticated hedge funds, which buy shares just before a deal closes then seek to profit in court. Dell declined to comment and Stuart Grant, who represented the investors seeking appraisal, did not immediately respond to a request for comment.

Last year, Vice Chancellor Travis Laster found that Dell fair value was $17.62 per share, and ordered the company to pay the difference to Magnetar Capital and others who sought appraisal of 5.5 million shares.

Laster surprised corporate lawyers by rejecting the price generated by what he acknowledged was an unconflicted sale to founder Michael Dell and private equity firm Silver Lake Partners. The judge instead focused on what he said were inherent problems with management-led buyouts.

Laster should have given “heavy weight” to the deal price, given the evidence of fair play and market efficiency in the sale, according to the 82-page unanimous opinion written by Justice Karen Valihura.

Laster “ignored the efficient market hypothesis long endorsed by this court,” said the ruling.

The Supreme Court remanded the case to Laster and said he should follow the ruling’s guidance to determine fair value, which the court suggested should be the deal price.

“We give the vice chancellor the discretion on remand to enter judgment at the deal price if he so chooses, with no further proceedings,” said the ruling.

The decision is the second reversal of an appraisal ruling in recent months by the Supreme Court, which issues relatively few decisions on these types of lawsuits.

In August, the Supreme Court said Chancellor Andre Bouchard erred in finding payday lender DFC Global Corp was sold too cheaply and criticized Bouchard’s finding that private equity buyers do not necessarily pay fair value.

Reporting by Tom Hals in Wilmington, Del.; Editing by Chizu Nomiyama and Matthew Lewis


© 2017 Reuters All Rights Reserved




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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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.