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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: Financial Times, May 31, 2016 article

FINANCIAL TIMES > companies >



May 31, 2016 6:33 pm

Delaware court finds Dell’s $24bn buyout underpaid investors

James Fontanella-Khan and Leslie Hook in New York


Michael Dell and Silver Lake could be forced to pay millions of dollars to former Dell shareholders after a court ruled they significantly underpaid investors in the $24bn buyout of the PC maker in 2013.

A Delaware judge ruled on Tuesday that Dell shareholders should have been paid $17.62 per share instead of the $13.75 paid by Mr Dell, who owned a little under 16 per cent of the company, and the US private equity group.

The ruling, which Mr Dell and Silver Lake can appeal, could cost the buyers about $20m as about 5.2m shares are still eligible for appraisal, according to court documents.

“The sale process functioned imperfectly as a price discovery tool, both during the pre-signing and post-signing phases,” said Travis Laster, vice-chancellor of Delaware’s special corporate court.

The ruling is a black eye for Mr Dell and Silver Lake, which were attacked at the time for underpaying and then changing the voting rules to prevent the offer being blocked.

Magnetar Capital, a hedge fund, could net about $15m as it has legal rights to about 3.8m shares.

Dell’s $24bn sale to its founder came under scrutiny as many investors believed Mr Dell was conflicted: playing seller and buyer at the same time. A spokesperson for Dell declined to comment on Tuesday’s ruling.

In the wake of the financial crisis, Dell’s PC sales had slipped, causing share prices to fall — and presenting Mr Dell with an opportunity.

The efforts by Mr Dell and Silver Lake to take Dell private were contested by shareholders from the beginning. Shareholders who opposed the deal included billionaire activist Carl Icahn as well as T Rowe Price, which believed the market was underpricing Dell.

Opposition from shareholders forced the bidding group to delay the shareholder vote three times, and twice sweeten their offer, before the deal was passed.


The sale process functioned imperfectly as a price discovery tool

- Travis Laster, vice-chancellor of Delaware’s special corporate court

When it came time for the final vote, T Rowe Price accidentally voted its shares in favour of the deal, despite being publicly opposed to it, a move that means it is now disqualified from receiving any payout under the court ruling. T Rowe Price could have claimed more than $100m if it had voted against the deal.

The court’s ruling also raises questions about the role played by bankers and lawyers advising Dell’s board on the sale. JPMorgan Chase and Evercore acted as the Dell board’s financial adviser, while Debevoise & Plimpton was its legal counsel.

Several rival proposals, including one from Carl Icahn and another from Blackstone, were made after Mr Dell’s first bid was made but none turned into serious bids.

Gary Lutin, chairman of the Shareholder Forum, said the ruling would have little impact on Dell’s planned $62bn cash and shares acquisition of EMC, the data storage maker. “The financial impact of it will be negligible,” he said. He added the case was a legal milestone for clearing up confusion around appraisals in private equity buyouts, which typically leverage the difference between the market value of a company and its intrinsic, long-term value.


© The Financial Times Ltd 2016


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.

Inquiries about this project and requests to be included in its distribution list may be addressed to

The information provided to Forum participants is intended for their private reference, and permission has not been granted for the republishing of any copyrighted material. The material presented on this web site is the responsibility of Gary Lutin, as chairman of the Shareholder Forum.

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.