Updated: March 18, 2019
Status: Ongoing Case
Labaton Sucharow was appointed co-lead counsel in this action challenging a share exchange transaction through which the controlling stockholders of Dell – Michael Dell and Silver Lake Group LLC – breached their fiduciary duties and expropriated billions of dollars in value from Dell’s Class V Stockholders.
Pursuant to the transaction, Dell redeemed all outstanding shares of Class V Stock for a combination of cash and Dell Class C Stock purportedly valued at a total of $120 per Class V share, a consideration that was significantly undervalued. To obtain this price, Dell’s controllers created a sham special committee that was riddled with conflicts, failed to obtain appropriate and independent advice, and ultimately aligned itself with Dell. The committee originally recommended an initial proposal at an even lower price, prompting a revolt by Class V stockholders. When it became clear that stockholders would reject the deal, the committee effectively removed itself from negotiations, as Dell and its financial advisors negotiated directly with a small group of stockholders to secure support for the transaction.
The absence of a properly functioning special committee was particularly harmful, because Dell’s controllers applied coercive pressure on the stockholders to accept their inadequate offers, including threatening to orchestrate an initial public offering followed by a forced conversion of Class V shares into Class C shares. Additionally, stockholders were misled about myriad material aspects of the committee process, including conflicts of interest afflicting committee members and their financial advisers.
Faced with the threat of a forced conversion, lacking a proper advocate in the Special Committee, and based on materially misleading and incomplete proxy materials, the stockholders voted by a narrow margin to accept the inadequate transaction.
The case is In re Dell Technologies Inc. Class V Stockholders Litigation, No. 2018-0816 (Del. Ch.). Labaton Sucharow represents lead plaintiff Steamfitters Local 449 Pension Plan.