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The Shareholder Forumtm

special project of the public interest program for

Fair Investor Access

Supporting investor interests in

appraisal rights for intrinsic value realization

in the buyout of

Dell Inc.

For related issues, see programs for

Appraisal Rights Investments

Fair Investor Access

Project Status

Forum participants were encouraged to consider appraisal rights in June 2013 as a means of realizing the same long term intrinsic value that the company's founder and private equity partner sought in an opportunistic market-priced buyout, and legal research of court valuation standards was commissioned to support the required investment decisions.

The buyout transaction became effective on October 28, 2013 at an offer price of $13.75 per share, and the appraisal case was initiated on October 29, 2013, by the Forum's representative petitioner, Cavan Partners, LP. The Delaware Chancery Court issued its decision on May 31, 2016, establishing the intrinsic fair value of Dell shares at the effective date as $17.62 per share, approximately 28.1% more than the offer price, with definitive legal explanations confirming the foundations of Shareholder Forum support for appraisal rights.

Each of the Dell shareholders who chose to rely upon the Forum's support satisfied the procedural requirements to be eligible for payment of the $17.62 fair value, plus interest on that amount compounding since the effective date at 5% above the Federal Reserve discount rate.

Note: On December 14, 2017, the Delaware Supreme Court reversed and remanded the decision above, encouraging reliance upon market pricing of the transaction as a determination of "fair value." The Forum accordingly reported that it would resume support of marketplace processes instead of judicial appraisal for the realization of intrinsic value in opportunistically priced but carefully negotiated buyouts.


Forum reference:

View that fund manager will benefit from volunteering responsibility for errors that lost its investors' rights to Dell appraisal


For the court decisions that the discovery of T. Rowe Price's voting errors made the shares held in its managed accounts ineligible for appraisal, and denying their motion for an "equitable" award of interest accruals, see

Additional court records and reports addressing both the voting and ownership errors can be found in the "Entitlement to Appraisal Rights" section of the Dell project's reference page.


Source: Investment News, June 3, 2016 article

T. Rowe Price makes a $190 million misstep

Wrong vote in 2013 on Dell proxy costs shareholders

Jun 3, 2016 @ 12:41 pm

By John Waggoner


T. Rowe Price is discovering that when you vote the wrong way in a buyout deal, you repent at leisure — and with millions of dollars.

The Baltimore mutual fund giant made a rare error by voting in favor of the 2013 buyout of Dell by founder Michael Dell, according to the Wall Street Journal. The company had opposed the deal, saying it undervalued the 30 million shares held in T. Rowe Price mutual funds.

T. Rowe could have collected about $190 million in the settlement, but its vote disqualified the company from suing for more money. Mr. Dell and his partners, Silver Lake Partners, will have to pay some investors about $35 million in the wake of the June 1 ruling by a Delaware special court.

The ruling is particularly embarrassing for T. Rowe Price, which asked Delaware Judge Travis Laster to appraise its shares in February 2014. At the time, the company said it had not voted for the deal. But in August of that year, it reported that it had voted for the deal to federal regulators.

The ruling seems to leave the company with few options. “We're in the process of reviewing the court's opinions and considering our options,” T. Rowe Price spokesman Brian Lewbart said.

Fund companies vote in thousands of proxies, a routine but administratively complex undertaking. “T. Rowe Price has taken a lot of back-office effort and tried to make them more efficient,” said Todd Rosenbluth, director of ETF and mutual fund research for S&P Global Market Intelligence. “Their eye wasn't on the ball properly.”

Normally, mutual fund companies tend to be passive in proxy votes, preferring to sell shares rather than engage in proxy battles.

Investors in T. Rowe price funds probably shouldn't be waiting for a big fat bump from any adjustment from T. Rowe Price. Assuming a payout of $190 million for about 30 million shares, investors would get about $6.33 a share in compensation. But it would be unusual for any fund to have more than 2% to 5% of its assets in any one stock. “Those are well-diversified funds,” Mr. Rosenbluth said. “Anything you're missing out on is unfortunate as a shareholder, but the error probably didn't hurt the funds too much.”

Citigroup, in a research note, said it was most likely that the fund company, rather than the individual funds, would foot the tab. They estimate the mistake would cost the stock about 80 cents a share, but doubts the payout would affect the stock in the short or long term. And, while the mistake modestly hurts the T. Rowe Price brand, its efforts to do the right thing by shareholders offsets some of the damage, Citi said.


Copyright © 2016 Crain Communications Inc.




This project was conducted as part of the Shareholder Forum's public interest  program for "Fair Investor Access," which is open free of charge to anyone concerned with investor interests in the development of marketplace standards for expanded access to information for securities valuation and shareholder voting decisions. As stated in the posted Conditions of Participation, the Forum's purpose is to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant is expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

The management of Dell Inc. declined the Forum's invitation to provide leadership of this project, but was encouraged to collaborate in its progress to assure cost-efficient, timely delivery of information relevant to investor decisions. As the project evolved, those information requirements were ultimately satisfied in the context of an appraisal proceeding.

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