WALL STREET JOURNAL.
Dell, T. Rowe Price Settle Buyout Lawsuit for $25 Million
voting mistake cost mutual-fund company nearly $200 million
In exchange for a $25 million payment from Dell, T. Rowe Price
has agreed not to appeal court rulings that disqualified it from
a larger payday over the technology company’s buyout, people
familiar with the matter said. PHOTO: BAZUKI MUHAMMAD/REUTERS
June 29, 2016 11:31 a.m. ET
T. Rowe Price Group
shareholders are getting some of their money back after
a proxy voting blunder cost the mutual-fund company nearly $200
Dell Inc. will pay T. Rowe about $25 million
to settle a long-running lawsuit over the
technology giant’s buyout, according to people familiar
with the matter.
That is a fraction of the almost $200 million T. Rowe would have
received had it not accidentally voted in favor of the 2013 deal. A
Delaware judge ruled last month that founder
Michael Dell and his
private-equity backers underpaid for the company and ordered them to
repay dissenting investors -- a windfall that T. Rowe was ineligible
exchange, T. Rowe has agreed not to appeal a series of unfavorable
court rulings that disqualified it from a larger payday, the people
agreement caps an embarrassing saga for T. Rowe, one of the biggest
managers of U.S. retirement assets and large shareholder in many large
companies. It is an effort to do right by shareholders, who are
ultimately on the hook for the payments T. Rowe made to affected funds
earlier this month.
private-equity firm Silver Lake took Dell
private for $13.75 a share, or about $25 billion. T. Rowe
publicly opposed the buyout, arguing Mr. Dell and Silver Lake were
buying the company on the cheap just as it was poised for a rebound.
T. Rowe mistakenly voted its shares in favor of the deal, a
back-office error that made it ineligible, under Delaware law, to sue
for a higher price in court.
Other disgruntled investors did so, and following a trial last fall, a
Delaware judge ruled that the pair had underpaid by about $6 billion.
Those investors, the largest of which is hedge-fund firm Magnetar
Capital LLC, will collect another $3.87 a share, plus interest.
judge ruled that T. Rowe was ineligible to share in that bounty
because of the voting mix-up. He also rejected the asset manager’s
request for interest payments that would have accrued had it voted
Under the new settlement, T. Rowe cannot appeal that decision, the
Rowe earlier this month said it would pay
$194 million to clients as compensation for
the error, making the payment from its available cash. The
charge, the firm’s largest ever one-time deduction from earnings, will
reduce second-quarter earnings by 46 cents a share, it said.
Payments were made to four U.S. mutual funds, one overseas fund, two
trusts and about a dozen other institutional client accounts. T. Rowe
paid the impacted portfolios directly, which resulted in a relatively
small performance bump.
Analysts said T. Rowe, which managed $764.6 billion in assets at the
end of March, had a strong balance sheet that could absorb the charge.
Still, the settlement with Dell helps T. Rowe recoup some of that
money and lessens the blow to shareholders.
Assuming the same tax treatment, the settlement would recoup about 6
cents a share in earnings.
its part, Dell avoids the risk of an expensive and uncertain appeal.
It is currently working to complete its $67 billion acquisition of
EMC Corp. a particularly
complicated deal that, if completed, would be the largest pure
technology takeover ever.
Liz Hoffman at
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