Wednesday, June 8, 2016

Dell, Dell, Delaware, and More Dell!

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:

-Anne Tucker

Anne Tucker, Corporate Governance, Corporations, Delaware, Legislation, Litigation, M&A, Shareholders | Permalink


Super post. Thanks so much for highlighting this case and for the links to additional information. Very helpful. I am changing my corporate finance course and text to address this.

Posted by: joanheminway | Jun 8, 2016 3:25:55 PM

Vice Chancellor Laster's opinion turns on the character of the ultimate buyer notwithstanding the complete open shop of a sale transaction, i. e., every follower of Dell stock on the planet knew Dell was in play and available. That is very troubling analytically, at least to me. Because of the open shop, and the presence in the marketplace of buyers fully capable of making a bid at a price higher than the deal price, the suggestion that another $3.87 was needed to reach a "fair" price level strikes me as bizarre. (To what extent was that result improperly influenced by Dell's vastly higher value in the distant past, when the industry was in a far different place?) The intrinsic value of a corporation as large and as complex as Dell is unascertainable to any degree of confidence, that is why a fairly derived market price should be the standard, not some theoretical figure sprung from the imagination of one judge. I hope the Delaware Supremes are asked to weigh in on this case.

Posted by: Craig Sparks | Jun 9, 2016 7:58:19 AM

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