Fri May 13, 2016 2:57pm EDT
T Rowe Price loses lawsuit over 2013 Dell buyout
T. Rowe Price Group Inc cannot sue computer maker Dell Inc for a
higher price in the 2013 buyout by its founder because the fund
company voted, albeit mistakenly, in favor of the deal, a Delaware
judge has ruled.
The unusual dispute leading to Wednesday's decision stemmed from the
mutual fund company's bid to recoup more for its 27 million Dell shares
than the $13.75 per share paid in the buyout, by using a type of lawsuit
known as appraisal.
After Michael Dell and private equity firm Silver Lake took the computer
maker private, hundreds of shareholders unhappy with the terms, egged on
by billionaire activist investor Carl Icahn, sought to have a judge review
whether the price was fair.
The initial amount of Dell stock being appraised made it one of the
biggest cases of its kind.
To qualify for an appraisal, a shareholder must not vote for a deal and
must continuously hold the stock until the deal closes.
T. Rowe Price actively opposed the buyout and thought it voted against it.
But according to Wednesday's decision, its voting system generated
instructions to vote in favor of the merger. The instructions were passed
through stockholder service firms including Institutional Shareholder
Services Inc, Broadridge Financial Solutions and Cede & Co.
The error proved fatal. "The T. Rowe Petitioners' shares do not qualify
for appraisal," Judge Travis Laster of Delaware's Court of Chancery wrote
in a 70-page opinion.
Bill Benintende, a T. Rowe Price spokesman, said: "We're disappointed in
the ruling and are in the process of reviewing the opinion and evaluating
Hedge funds that specialize in arbitration cases have been criticized for
buying stock of companies involved in mergers so late in the process that
they are not entitled to vote.
Delaware courts have found that as long as they did not vote for deals,
they can seek appraisals.
But mutual funds, unlike hedge funds, must report how they voted, which is
how T. Rowe Price's Dell vote came to light.
Last year, Laster ruled that T. Rowe Price and other funds were beneficial
but not continuous legal owners of nearly 1 million Dell shares and could
not seek an appraisal.
The court has not determined a fair value for the Dell stock.
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