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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.

 

 

For a printable copy of this report with a copy of its referenced letter, click here.

Forum Report: Fair Investor Access (Dell Valuation Project)

Getting the Information Before Instead of After Investor Decisions

In the absence of any response to my March 18 letter asking Dell’s legal counsel for any additional views of how the company believes a demand for records should be stated to satisfy the requirements of applicable Delaware law,[1] I sent the company a revised demand that accommodates all of the views that had been presented in two letters as reasons why Dell should not provide the information needed by investors.[2]

·         March 21, 2013 letter from Gary Lutin as Delegate to Michael S. Dell of Dell Inc., re: Revised demand for records (4 pages, 197 KB, in PDF format), bookmarked for its sections addressing

§  Authority of Delegate to act on behalf of Shareholder

§  Demand for records

§  Purposes of demand

§  Confidentiality requirements

The revised demand letter does not waive any rights to enforce the original demands, of course, but it is assumed that writing a new letter that eliminates Dell’s grounds for arguing will get the desired result much faster than engaging in the argument.

Routinely provided information

Although the letter is considerably longer than the initial demand, the amount of information demanded has been cut back to easily specified records that are routinely provided for investor review in court proceedings involving appraisal rights. Delaware law provides Dell shareholders with appraisal rights if they elect “dissenter” status, and experts representing investors would then be expected to review the same information that is specified in today’s revised demand to prepare professional valuation reports or views of what others have reported. Since it is certain in a transaction with Dell’s large number of shareholders that at least some will exercise dissenter rights to appraisal, it is also certain that Dell will eventually be required to allow investor access to all of the information in the revised demand.

 The revised demand will therefore require only that Dell provide access to the specified information now, rather than delay access until after the vote.

GL – March 21, 2013

Gary Lutin

Chairman, The Shareholder Forum

575 Madison Avenue, New York, New York 10022

Tel: 212-605-0335

Email: gl@shareholderforum.com

 

 

 

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.

Inquiries about this project and requests to be included in its distribution list may be addressed to dell@shareholderforum.com.

The information provided to Forum participants is intended for their private reference, and permission has not been granted for the republishing of any copyrighted material. The material presented on this web site is the responsibility of Gary Lutin, as chairman of the Shareholder Forum.

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.