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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.



The report below is one of two that followed an earlier article posted by the same author, "The Path to a Three-Way Race for Dell," within minutes of Dell's filing with the SEC of a preliminary proxy statement (SEC EDGAR Filing Details: 2013-03-29 15:49:59), which news organizations had reportedly been told to expect even though Dell's special committee had not yet determined what to propose. For that statement and two related disclosures that were filed soon after (2013-03-29 16:24:32 and 2013-03-29 16:33:49), see


Source: New York Times DealBook, March 29, 2013 article

Mergers & Acquisitions | March 29, 2013, 6:14 pm

What Dell Thought of Alternatives to the Silver Lake Proposal


Michael Dell, the founder of the computer company that bears his name.

Kimihiro Hoshino/Agence France-Presse — Getty Images

Michael Dell, the founder of the computer company that bears his name.

Dell Inc. directors have repeatedly stressed that they considered all potential ways to improve value for shareholders before accepting a $24.4 billion takeover bid by Michael S. Dell and Silver Lake.

The company’s voluminous proxy statement, filed on Friday, shows their concerns about other alternatives, including a big stock buyback and selling off parts of the business.

Buried in one of the filing’s exhibits is a presentation that JPMorgan Chase bankers delivered to a special committee of Dell’s board on Jan. 18. In it, the bankers listed potential problems with some of the alternatives to a full take-private bid by Silver Lake or another private equity firm.

Some of Dell’s shareholders, including Southeastern Asset Management and the billionaire Carl C. Icahn, have called on the company to turn away from the $13.65-a-share bid by Mr. Dell and Silver Lake. Southeastern has loudly demanded that existing shareholders be given the chance to stay on as investors, through what’s known as a stub. And Mr. Icahn has suggested the possibility of paying out a special dividend to investors.

The two new bids that arose out of a 45-day “go-shop” process, from both Mr. Icahn and the Blackstone Group, contemplate leaving some of Dell publicly traded. Both are essentially variations on a stub, since some of the computer maker will remain publicly traded.

Of the two most commonly mentioned possibilities — borrowing money to either buy back lots of stock or to pay out a special dividend — JPMorgan said that the moves would seriously limit Dell’s financial flexibility.

Both would severely limit the company’s cash flow, according to the bankers. And the latter would both push Dell’s dividend to levels beyond what its rivals pay and signal that the computer maker has no further places to invest.

The presentation also ran through the benefits and drawbacks of other possibilities, including a sale to a strategic buyer (“strategic buyer for the entire business is unlikely”) and a sale of Dell’s core PC manufacturing arm (“loss of scale and intersegment synergies” and “potentially diminished free cash flow and debt capacity”).

Given those arguments, one wonders what Dell directors will ultimately consider when deliberating the bids by Blackstone and Mr. Icahn.


Copyright 2013 The New York Times Company


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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