Court: Dell shares were undervalued by 28% in 2013 buyout
May 31, 2016, 10:28am CDT
A Delaware court has
Dell Inc. shares were worth
nearly $4 more than what shareholders received in the 2013 buyout.
The court of chancery
in the state of Delaware — widely recognized as the nation's best
forum for the determination of internal business disputes — determined
the value of Dell shares was $17.62 compared with the $13.75
paid by an investor group led by CEO Michael
Dell. That's a difference of 28 percent.
Delaware court has ruled that Dell Inc. shares were worth nearly
$4 more than what shareholders received in the 2013 buyout.
Attorneys for the
100-plus minority shareholders objecting to the October 2013 buyout
price had asked for $28.61 per share, according to a 115-page ruling
issued by the court on Tuesday.
The decision was based
on a four-day trial, 1,200 exhibits and 17 depositions. It's unclear
whether Dell will appeal the ruling. Company spokesman
David Frink declined to comment.
Most past Dell
shareholders can't expect a windfall due to the recent decision. Only
shareholders that sued over the buyout are eligible to receive the
higher payout. The largest holder is hedge fund Magnetar Capital,
which has rights to about 3.8 million shares and stands to collect
about $15 million,
according to the Wall Street Journal.
Gary Lutin — chairman of
Shareholder Forum, a New York company that moderates disputes between
shareholders and companies — said: "The court’s decision certainly
shows the shareholders who demanded appraisal, as well as all the
current investors and employees, that Mr. Dell was right about his
company being worth a lot more than the stock market’s pricing."
Round Rock-based Dell,
the No. 3 computer maker in the world, employs an estimated 13,000
workers in Central Texas. Its parent company is now poised to complete
a $67 billion acquisition of Massachusetts-based
EMC Corp. (NYSE: EMC) in what
would be the largest technology merger in history.
The Michael Dell-led
investor group paid $24.9 billion for Dell Inc. in the 2013
In May, a Delaware
chancery judge ruled that T. Rowe Price Associates Inc., an affiliate
of T. Rowe Price Group Inc. (Nasdaq: TROW) that was once Dell’s
couldn’t be part of the share appraisal
process because it voted in favor of the 2013 buyout — even
though it was done unintentionally.
In late 2015, the
Austin Business Journal reported that Dell agreed to
pay the New York-based Blackstone Group LP
(NYSE: BX) $25 million in due-diligence expenses as a
prospective buyer for Dell in the run-up to the 2013 buyout.
Michael Dell has
repeatedly cited the benefits of taking the company private and
highlighted its increasing market share in the personal computer
However, Dell has also
posted losses for the last three years. During fiscal 2016, it
reported a loss of $1.1 billion on revenue of $54.8 billion compared
with a loss of $1.2 billion on revenue of $58.1 billion during fiscal
2015, U.S. Securities and Exchange Commission filings show.
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