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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:

Judge rules some accounts managed by T Rowe Price ineligible for appraisal based on antiquated record ownership rules


For the referenced decision encouraging higher court review of precedents defining administrative requirements for perfecting appraisal rights, including broader implications for "appraisal arbitrage," see

Note: All of the petitioners that were subject to the court decision addressing processing inconsistencies relating to continuous ownership requirements are managed by T. Rowe Price and are also among their managed petitioners holding approximately 30 million shares that are being challenged for eligibility based on having voted in favor the Dell merger; see May 18, 2015 USA Today: "Dell moves to boot T. Rowe from appraisal case" and the referenced May 8, 2015 [May 15 2015 Public Version], In Re: Appraisal of Dell, Inc. (Consol. C. A. No. 9322-VCL): Letter on behalf of Dell Inc. to the Honorable J. Travis Laster with attached non-confidential Exhibits.


Source: The Wall Street Journal | MoneyBeat, July 13, 2015 article



4:47 pm ET
Jul 13, 2015 


Investors Challenging Dell Deal Hit a Clog in the ‘Proxy Plumbing’


By Liz Hoffman

Michael Dell ─ Associated Press

Who actually owns a share of stock?

The complicated answer to that question has tripped up some Dell Inc. investors challenging the technology company’s 2013 sale to its founder, and it could save Dell millions of dollars.

A Delaware judge on Monday found that because owners of 922,975 Dell shares failed to continuously hold their stock during the buyout process, they forfeited their rights to challenge the deal price. He blamed legal precedent and quirks of the country’s arcane stock-management system, and expressed frustration at his own ruling.

Monday’s 54-page ruling from Vice Chancellor J. Travis Laster, the Delaware Court of Chancery’s outspoken merger cop, describes large kinks in the nation’s “proxy plumbing”–the labyrinthine system that keeps tracks of public-company shares as they change hands. A web of brokers, transfer agents and bank custodians stand in between a company like Dell and the investors who ultimately own its stock.

Dell in 2013 was sold to its founder, Michael Dell, and private-equity firm Silver Lake Partners for $24.4 billion. Several investors, including the five funds at issue here, asked a judge to award a higher price for their stock, a legal process known as appraisal.

Dell’s appraisal is one of the biggest to date, and Monday’s ruling affects only a small fraction of the roughly 37 million shares that have objected to the $13.75-a-share deal price.

Like most U.S. investors, these five funds, including T. Rowe Price Group Inc.-managed funds, held their shares through custodian banks, which in turn participated in a national stock aggregator called the Depository Trust Company. DTC, which was created in the 1970s to reduce the mountains of paperwork that had to be generated each time a share of stock changed hands, holds shares in bulk and reassigns them to new owners as needed. It is the largest shareholder of record of most U.S. public companies.

To separate out the appraisal-seeking shares from the millions of other Dell shares on its books, DTC notified the custodian banks, who reassigned the shares under new entities. The “beneficial owner” of the shares never changed, but the title holder did.

Dell argued that these steps broke the continuous-ownership chain required under the appraisal rules, and Mr. Laster reluctantly agreed.

“Were it up to me, I would hold that the concept of a ‘stockholder of record’ includes the custodial banks and brokers,” he wrote. But “the funds lost their appraisal rights when their shares were re-titled in the names of their custodial banks ‘nominees.”

The ruling could have broader implications as the number appraisal cases spikes. Big cases are currently challenging the buyouts of AOL Inc. and PetSmart Inc. and others, and it’s possible that stock in these companies could have hit the same back-office snags as the Dell shares.


Copyright ©2015 Dow Jones & Company, Inc.


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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