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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:

Reactions to court determination that Dell's fair value exceeded its fair price


For the court's careful explanations of the distinction between fairly negotiated pricing and the intrinsic fair value of a company, and of the court's appraisal of that fair value, see

For other news reports of the court's decision in the closely watched appraisal case initiated October 29, 2013, by the Forum's representative petitioner, Cavan Partners, LP. and supported by its attorneys' research of court valuation standards, see the "Appraisal of Fair Value" section of the Dell project's reference page.


Source: Delaware Business Court Insider, May 31, 2016 (updated) article



Laster Rules Dell Merger Shortchanged Shareholders

Tom McParland, Delaware Business Court Insider

May 31, 2016


Vice Chancellor J. Travis Laster on Tuesday ruled that Michael Dell and the private equity firm Silver Lake underpaid investors by approximately 28 percent in the $24.4 billion going-private merger of Dell Inc. in 2013.

In a 114-page opinion, Laster ruled Silver Lake should have paid $17.62 per share to acquire the computer company, based on a discounted cash flow analysis. Instead, the technology investing firm bought Dell for $13.75 after a back-and-forth sales process in which it twice sweetened the pot for dissenting stockholders.

At the time of the sale, Dell was struggling to compete in the PC market, as internal revenue projections clashed with a depressed stock price and waning expectations for the company Michael Dell started out of his freshman dorm room more than three decades ago.

Only 70 percent of the shares present at a September 2013 merger voted in favor of the deal. Those opposed pursued the high-stakes appraisal action, arguing that Dell's fair value was more than twice the merger price.

Earlier this month, Laster booted approximately 27 million shares held by T. Rowe Price from the proceedings because of a mishap that caused them to be voted in favor of the merger.

T. Rowe Price publicly opposed the deal and said its shares were still eligible to be appraised. But Laster disqualified the shares under Delaware's dissenter requirement, which mandates that investors who wish to seek appraisal vote their shares against a merger.

Based on Laster's decision on Tuesday, T. Rowe Price would have been eligible for a payout of more than $100 million.

In his analysis, Laster described a sales process that was flawed but not malicious. For instance, he said, the chasm between the market's perception of Dell and the company's operative reality and limited competition throughout prevented investors from getting more consideration from their shares.

"The sale process functioned imperfectly as a price discovery tool, both during the pre-signing and post-signing phases," Laster said. "Its structure and result are sufficiently credible to exclude an outlier valuation for the company like the one the petitioners advanced, but sufficient pricing anomalies and disincentives to bid existed to create the possibility that the sale process permitted an undervaluation of several dollars per share."

Were the process to be challenged on the basis of fiduciary duties, it "would sail through if reviewed under enhanced scrutiny," he added.

Only Silver Lake and KKR & Co. submitted pre-signing offers to buy Dell, but KKR dropped out of the running, leaving Silver Lake as the only serious potential buyer. Blackstone Management Partners and billionaire activist investor Carl Icahn each made post-signing bids during a 45-day go-shop period, but both offers failed to materialize.

The outcome deal, on total, did not hold up as the most reliable indicator of Dell's value, Laster said. And while the market data foreclosed the petitioners' argument that the merger undervalued the company by $23 billion, the available information did show that investors were shortchanged, albeit to a lesser degree.

"What the market data does not exclude is an underpricing of a smaller magnitude, given that all of the participants constructed their bids based on a leveraged financing model and were limited by its constraints," he said.

In his review, Laster turned to a discounted cash flow, or DCF, analysis, an approach the Chancery Court favors because it "merits the greatest confidence within the financial community," and he seemed to distance the court from the industry-standard leveraged buyout pricing model for determining fair value.

"The fair value generated by the DCF methodology comports with the evidence regarding the outcome of the sale process," he said.

According to court documents, the bulk of the remaining shares eligible for appraisal belong to hedge fund Magnetar Capital, which stands to gain nearly $15 million for its almost 4 million shares, plus interest accruing from the deal's closing date.

Stuart M. Grant of Grant & Eisenhofer represented the petitioners. He declined to comment on the case.

Gregory P. Williams of Richards, Layton & Finger and a team of attorneys from Alston & Bird's Atlanta and Los Angeles offices represented Dell. Williams did not immediately return calls seeking comment.

The case was captioned In re Appraisal of Dell.

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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