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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:

Dell asks court to consider dissenter rights of shareholder after revelation of "discrepancy" vote


For expert views of the legal issues addressed below, including the positions of counsel for T Rowe Price, see footnote #2 of the following report:

Note: The version of the article below is a revision ("Updates after Monday court hearing") of the 7:12am original that was distributed to Forum participants shortly after its publication.


Source: Reuters, May 11, 2015 article



Deals  |  Mon May 11, 2015 1:09pm EDT

T Rowe's challenge to Dell deal may fuel critics of 'appraisal'

WILMINGTON, Del  |  By Tom Hals

Michael Dell, chief executive of Dell Inc, delivers his keynote speech at the All Things Oracle OpenWorld Summit in San Francisco, California September 25, 2013.

Reuters/Jana Asenbrennerova


An increasingly popular tactic used by hedge funds and others to extract more money from buyouts could soon face a major courtroom test when a big investor in Dell Inc may argue that it should be paid a higher price for the 2013 acquisition of the PC maker.


    The strategy, known as "appraisal," usually involves an investor who opposes a buyout price asking a judge to determine the fair value for the stock. The tactic is also known as "dissenter's rights" and is meant to protect investors from underpriced buyouts, but some Wall Street dealmakers say hedge funds use it as a hold-up strategy to squeeze extra money from mergers.


    The question in the Delaware litigation is whether an investor can come back to seek an appraisal once it emerges that the investor voted for, not against, the deal. The investor, T Rowe Price, is seeking a higher price for its Dell stock than the $13.75 per share offered in the $26 billion buyout led by Michael Dell and Silver Lake Partners.


Some holdout Dell investors have said fair value of Dell's stock was up to $25 per share. That could mean hundreds of millions of dollars are on the line for T Rowe Price and Michael Dell.




    T Rowe Price's case began in February 2014 when the company asked Delaware judge Travis Laster to appraise its roughly 27 million Dell shares, according to court records. It said it had notified Dell and had not voted its stock for the deal, satisfying the legal requirements for appraisal.


    However, in an apparent about-face, the money manager reported to securities regulators in August that it voted for the deal across its funds. That vote came to light earlier this month, based on a review of filings by USA Today.


    Asked if it had voted for the Dell deal, T Rowe Price did not directly respond.


    "We are aware of a discrepancy in the communication of our voting instruction on the Dell buyout," the company said in a statement.


At a court hearing on Monday, Gregory Williams, a lawyer for Dell, briefly addressed T Rowe Price's appraisal and told Laster the computer maker would soon begin "aggressive, limited discovery" into the fund manager's vote. Williams said Dell might ask Laster to toss T Rowe Price's appraisal claim.


    One Delaware law specialist said that if regulatory filings are correct, T Rowe Price's gamble on appraisal may be over.


    "I think there is a pretty serious question of their continued ability to pursue appraisal rights," said Larry Hamermesh, a professor at the Widener University School of Law in Wilmington, Delaware.


     T Rowe Price is one of scores of Dell holders to seek appraisal claims, covering more than 38 million shares in total, according to court records.


    Laster heard arguments on Monday that many of those claims should be tossed for technical reasons. He did not say when he would rule.




T Rowe Price's appraisal claims were not among those challenged by Dell on Monday and the fund manager's attorney, Stuart Grant, did not discuss his client's appraisal claim at the hearing.


    One corporate law professor said T Rowe Price will be able to continue seeking appraisal even if it voted for the deal.


    This is because the law governing appraisal looks not to the vote of the beneficial holder of the stock, which is T Rowe Price, but to the record-holder of the stock. For the vast majority of investors, including T Rowe Price, the record holder was Cede & Co, which aggregates stock certificates.


    Delaware judges have found that so long as an investor's appraisal claim is covered by an outstanding number of Cede-held shares that abstained or voted no on the deal, the appraisal case can proceed.


    Brian Quinn, a professor at Boston College Law School, acknowledged T Rowe Price's situation looks bad from a public relations standpoint. "But when you look at the law, I don't think it will matter," he said.


    That law has fueled Wall Street criticism of appraisal, which has been used by a growing number of hedge funds to wring a bit more money from a merger.


    The funds often seek appraisal using stock they bought after the record date for determining who casts a ballot on the deal. As companies see it, the hedge funds are pursuing dissenter's rights without voting on the deal.


    Quinn said that T Rowe Price is distinct from the hedge funds, even if it is using the law in the same way.


    Hedge funds buy their stock at the last minute and often seek a quick settlement.


    T Rowe Price was a long-term holder of Dell stock and a vocal critic of the price of the Dell deal. Its large appraisal claim is the kind of action that Delaware judges have said can act as a necessary deterrent against underpriced deals.


 (Reporting by Tom Hals in Wilmington, Delaware; Editing by Nick Zieminski, Noeleen Walder and Ted Botha)


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.