Wednesday, June 8, 2016
If you've been slamming away on a writing deadline then perhaps you've missed the opportunity (like me) to dive into the recent Chancery Court of Delaware Dell appraisal rights opinion (downloadable here). Have no fear, your summary is here.
Vice Chancellor Laster valued Dell’s common stock at $17.62 per share, reflecting a 28% premium above the $13.75 merger price that was paid to Dell shareholders in October 2014 in a going private transaction lead by company-founder Michael Dell. Dell's going private transaction was opposed by Carl Icahn and this juicy, contentious transaction has its own required reading list. When conceding defeat, Carl Icahn sent the following letter to Dell Shareholders:
New York, New York, September 9, 2013
Dear Fellow Dell Inc. Stockholders:
I continue to believe that the price being paid by Michael Dell/Silver Lake to purchase our company greatly undervalues it, among other things, because:
1. Dell is paying a price approximately 70% below its ten-year high of $42.38; and
2. The bid freezes stockholders out of any possibility of realizing Dell’s great potential.
Fast forward nearly 3 years later and it seems Vice Chancellor Laster agrees. VC Laster reached his undervaluation decision despite no finding of significant fault with the company’s directors' conduct or a competing bidder. Instead, VC Laster focused on the fall in the company’s stock price, and a failure to determine the intrinsic value of Dell before negotiating the buyout. The business press and law blogs have exploded with articles, a few of which are highlighted below:
- For a good summary of the ruling see this succinct Delaware Chancery Court blog post and Andrew Ross Sorkin's NY Times article.
- For a good discussion of how appraisal remedies were applied in Dell, see Steven Davidoff Solomon's NY Times article here.
- For a discussion of the increase in shareholder appraisal actions and contributing factors (arbitrage) and the future of appraisal rights, see this ABA article.