As discussed in our very first post, back in July of this year Carl Icahn famously encouraged his fellow shareholders in Dell Inc. to exercise their appraisal rights rather than cash out and accept the offer on the table from Michael Dell in his bid to take his namesake company private. This week, on September 9, 2013, Mr. Icahn sent another letter to Dell stockholders, announcing his decision not to defeat Mr. Dell’s take-private proposal after acknowledging that too many obstacles to his counter-proposal stood in his path.

Importantly, however, despite Icahn’s throwing in the towel on any competing proposal to Michael Dell’s, he repeated his opposition to that offer and trumpeted once again his intention to seek appraisal rights for his shares in the company. This is especially significant because Icahn had brought a lawsuit in Delaware Chancery Court claiming that the Dell directors breached their fiduciary duties in renegotiating the buyout deal with Michael Dell and undertaking other actions such as adjusting the record date for determining which shareholders were eligible to vote. In rejecting Icahn’s initial challenges, the Delaware Chancellor validated the board’s procedures and indicated skepticism over any breach of fiduciary duty claims. And yet Icahn — quite correctly — still remains undaunted in pursing his appraisal rights, knowing full well that the apparent lack of a breach of fiduciary duty in no way suggests that the merger price is inherently fair. After all, fiduciary duty and appraisal rights are two totally different animals.

In short, the issue at stake in an appraisal proceeding is not whether the board acted improperly but whether the merger consideration short-changes shareholders by giving them less than the fair value of their shares. Icahn clearly continues to believe that the company is worth more than the deal price suggests, and the Delaware Court’s statements to date about the deal process says nothing about the shares’ true value.

 

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