T. Rowe Price to pay out $194 million to
shareholders in four mutual funds, other clients
Firm's moves stems from
error it made in voting on the 2013 buyout of Dell
2016 @ 4:07 pm
T. Rowe Price said Monday it would pay about $194
million to fund shareholders and other clients for an error it made in
voting on the 2013 buyout of Dell.
The shareholders held about 31 million Dell shares at
At the time of the buyout,
T. Rowe Price thought that the $13.75 share price offered by Michael Dell and
others undervalued the company. “Several T. Rowe Price funds, trusts, and
clients subsequently filed a petition with the Delaware Court of Chancery to
seek a fair value appraisal for their Dell shares,” the company said in a press
release. The court ruled that Dell's fair value was $17.62 per share.
Unfortunately, T. Rowe inadvertently voted for the merger, rather than against.
The court ruled last week that the vote made T. Rowe's shares ineligible to
pursue the higher share value. While this validated T. Rowe's thinking on the
shares, it was cold comfort to shareholders.
result, T. Rowe Price expects to record a one-time charge of approximately $194
million in its second quarter of 2016, which is expected to reduce net income,
after tax, by about $118 million—or approximately $0.46 in diluted earnings per
share of common stock,” the Baltimore-based investment firm says. The company
will fund the payments from available cash.
T. Rowe Price fund shareholders will see a boost on the next-computed share
value of their funds. They are:
Equity Income: 14 cents a share, or 0.45% of the net asset value
Science and Technology: 42 cents a share, or 1.20% of NAV
Institutional Large-Cap Value: 4 cents a share, or 0.21% of NAV
Equity Income Portfolio: 15 cents a share, or 0.53% of NAV.
“Since this situation began, our focus has been on securing fair value from the
Dell buyout for our clients,” T. Rowe Price president and CEO
Stromberg said in a
statement. “The court's determination that the original buyout consideration
offered by Dell was too low validated our original investment view. By
compensating our clients based on the court's May 31, 2016, ruling, clients will
come out ahead as compared with how they would have fared had they taken the