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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 reference:

Court decides fund manager must be responsible for its voting error to avoid absurd interpretation allowing abuse of appraisal law


For the decision reported below, see

Note: The decision addresses voting of 31,052,130 Dell shares in 14 mutual fund and pension accounts managed by T. Rowe Price, each of which is identified on page 20 (PDF p.21) of the Opinion. In a previous July 13, 2015, Memorandum Opinion in the same case, the court determined that an additional 922,975 shares in 5 other accounts managed by T. Rowe Price were made ineligible for appraisal rights by administrative errors in the maintenance of continuous ownership. According to a July 30, 2015 court submission (footnote #1 on  page 1 of the Brief in Support of Motion; PDF p.10), only one of the accounts managed by T. Rowe Price, the Morgan Stanley Defined Contribution Trust with 357,500 shares, remains eligible for appraisal as a result of the fund manager having failed to process any voting instructions for that account.

Court records addressing both the voting and ownership errors can be found in the "Entitlement to Appraisal Rights" section of the Dell project's reference page.


Source: Delaware Business Court Insider, May 18, 2016 article

T. Rowe Price Shares Ineligible for Appraisal, Court Rules

Tom McParland, Delaware Business Court Insider

May 18, 2016


Shares belonging to T. Rowe Price & Associates, one of Dell's largest investors, will not be part of a massive appraisal action arising out of Dell's $25 billion going-private merger, the Court of Chancery ruled last week.

In In re Appraisal of Dell, T. Rowe Price had argued its shares were eligible for appraisal, even though a technical glitch caused the shares to be voted in favor of the deal. Under Delaware law, shares are only eligible for appraisal if the record holder did not support or vote in favor of the transaction.

In a detailed 70-page opinion, Vice Chancellor J. Travis Laster found the investment company was not the holder of record. A complex legal web vested the actual rights to Cede & Co., a subsidiary of Depository Trust Co. that processes transfers of stock certificates.

Though T. Rowe Price vociferously opposed the merger, its computerized voting system sent the wrong instructions to proxy advisory firm Institutional Shareholder Services, which then passed along the directives to 14 T. Rowe Price-sponsored mutual funds, telling them to approve the deal.

The firm had argued that it should not be punished for the unfortunate mistake and asked the court to consider its actual intent, but Dell pushed back, saying that Cede's vote precluded T. Rowe Price from satisfying Delaware's dissenter requirement.

On May 11, Laster acknowledged that an error had occurred, but he was unapologetic in rejecting T. Rowe Price's argument for appraisal.

"When an investor elects to use intermediaries, the investor assumes the risk that the intermediaries will err or otherwise fail to act in accordance with the investor's wishes. That general rule applies to the appraisal statute," he said.

"By choosing to rely on ISS to transmit its voting instructions, T. Rowe accepted the risk that ISS might transmit voting instructions inconsistent with T. Rowe's true intentions."

The decision will likely impact how much Dell will have to pay out to dissenting stockholders if Laster finds that the value of Dell's stock was higher than the $13.75-per-share deal price. At trial in October, petitioners argued that the actual value was more than twice that amount.

Laster's decision in the underlying appraisal action is still pending.

In his opinion, Laster distinguished the Dell case from a trio of recent decisions involving appraisal arbitrage where the Chancery Court waived the requirement that a petitioner bear the burden of proving that a record holder had not voted the shares eligible for appraisal in favor of the merger giving rise to appraisal rights.

In those decisions—In re Appraisal of, Merion Capital LP v. BMC Software and In re Appraisal of Transkaryotic Therapies—there was no evidence of how the shares were voted. And Laster said following that approach in the instant case would lead to the "absurd result" of allowing a nondissenter to pursue dissenters' rights.

"If a court cannot examine evidence regarding how Cede actually voted, then the combination of that evidentiary limitation and the record holder requirement will permit an appraisal petitioner who holds in street name to give instructions to vote its shares in favor of a merger, have those instructions carried out by the record holder, and then nevertheless seek an appraisal for the very same shares, as long as there were sufficient shares that Cede had not voted in favor of the merger to cover the appraisal class," he said.

In this case, however, Dell proved that Cede voted T. Rowe Price's shares in favor of the merger, preventing T. Rowe Price from meeting the dissenter requirement and barring the shares from being appraised.

T. Rowe Price and the petitioners were represented by Stuart M. Grant of Grant & Eisenhofer. Dell was represented by Gregory P. Williams of Richards, Layton & Finger and a team of attorneys from Alston & Bird in Los Angeles.

The attorneys did not immediately respond to calls seeking comment on the case.

Tom McParland can be contacted at 215-557-2485 or at


Copyright 2016. ALM Media Properties, LLC.


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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