Thursday, July 18, 2013
OK, so the Dell board adjourned today's meeting rather than face the indignity of having to announce to the world that Icahn had won this battle and that it had come up 150 million votes short. So, now the board has until July 24th to round up as many of non-votes as possible to get over the hump. Remember that courts when asked to review a board decision to adjourn a shareholder meeting to round up more votes in favor of their preferred transaction will rely on the business judgment standard. So, it's deferential of board actions - short of coercion or improper vote buying boards are permitted to adjourn in this manner.
What might coercion or improper vote buying look like? Well, I invite you to jump into the Way-Back Machine to 2002 and the HP-Compaq merger. Sensing that HP shareholders wouldn't vote in favor of the controversial merger, Fiorina organized a conference call with DB bankers and their asset management group (that had just voted against the deal) to discuss DB's continuing relationship with HP. During the call, Fiorina said, “This is obviously of great importance to us as a company. It is of great importance to our ongoing relationship.”
An executive from DB on the call then reminded the asset management folks that HP is an “enormous” customer and then tells them they would have to defend a “no” vote to the highest levels of the bank. According to the transcript the DB executive said to the team, “Obviously, if you don’t want to change your vote, that’s your call. I would suggest to you — and I’m not trying to put undue pressure — but make sure that you have a very strong documented rationale for why you voted the way you did.”
After the call DB changed enough votes to help the merger pass.
Good times, good times.
Tuesday, July 16, 2013
For those of you who have been following developments in the litigation surrounding Delaware's arbitration procedure, the following paragrahs from a recent Letter Opinion by Vice Chancellor Glasscock are illuminating. All all I can say is, "Yes, and all of these arguments are equally valid when applied to the question of Chancery Court arbitration." Here:
Court of Chancery Rule 5.1 exists to “protect the public’s right of access to information about judicial proceedings” and “makes clear that most information presented to the Court should be made available to the public.” The public’s right to access judicial records is considered “fundamental to a democratic state” and “necessary in the long run so that the public can judge the product of the courts in a given case.” Accordingly, under Rule 5.1, only “limited types of information qualify for confidential treatment in submissions to the Court.” The party seeking confidential treatment of the record must demonstrate “good cause” for such treatment:
For purposes of this Rule, “good cause” for Confidential Treatment shall exist only if the public interest in access to Court proceedings is outweighed by the harm that public disclosure of sensitive, non-public information would cause. Examples of categories of information that may qualify as Confidential Information include trade secrets; sensitive proprietary information; sensitive financial, business or personnel information; sensitive personal information such as medical records; and personally identifying information such as social security numbers, financial account numbers, and the names of minor children. ...
Rule 5.1 also “implements the powerful presumption of public access providing that ‘[e]xcept as otherwise provided in this Rule, proceedings in a civil action are a matter of public record.’”21 Thus, the party seeking to “obtain or maintain Confidential Treatment always bears the burden of establishing good cause for Confidential Treatment”22 and must demonstrate that “the particularized harm from public disclosure of the Confidential Information in the Confidential Filing clearly outweighs the public interest in access to Court records.”
The arbitration case is presently under consideration by the Third Circuit.
Monday, July 15, 2013
Here is the Dell Special Committee's official response to Icahn warrant offer from last week:
“We are today reviewing the fifth proposal from Carl Icahn, which would include issuance of warrants in connection with the self-tender proposal he previously outlined. We are working with our advisors to evaluate whatever benefits might flow to shareholders from the warrant he has proposed to include in his structure. We would note that a portion of any value attributed to the warrants would be offset by a reduction in the value of the recipients’ stub equity, as well as the fact that receipt of the warrant would likely be a taxable event. We have been and remain willing to meet or talk with Mr. Icahn about his various proposals, including at a meeting scheduled earlier this week which he requested and subsequently cancelled.
“More broadly, it is important to note that all of Mr. Icahn’s various proposals require abandoning an all cash transaction at a substantial premium with a high degree of closing certainty that shifts all of the risks of the business to the buying group in exchange for a highly speculative recapitalization concept that relies upon the future value of a leveraged public technology company. We have studied variations on this theme for months and continue to have substantial reservations about that value proposition.
“Most important, we believe it is critical that Dell shareholders not be distracted from the clear choice they must make next week – take $13.65 per share in cash or bear the risks of continuing to hold their Dell shares.”
Shorter version: We are thinking about it because our fiduciary obligations require us to, but there is nothing really here of any interest to us. Move along.