Mutual fund company T-Rowe Price Group Inc. (TROW) will pay $194M to clients because of a proxy-voting mistake it made in 2013 during the management buyout of Dell Inc. The payments will be made to a number of institutional client accounts, two trusts, four U.S. mutual funds, and one fund located overseas.
Among the funds to benefit the most are the:
· T. Rowe Price Equity Income Fund (PRFDX)
· T. Rowe Price Science & Technology Fund (PRSCX), which is expected to be affected the most because it has a greater number of Dell shares as a percentage of all its assets.
· T. Rowe Price Institutional Large-Cap Value Fund (TILCX)
Shareholders will not get cash as part of this payout. Instead, they will see the results in the performance bump of the impacted portfolios.
During the time of the voting mistake, the shareholders held about 31 million Dell shares. T. Rowe Price thought that Michael Dell and others were offering a $13.75 share price that undervalued the company. Because of that, a number of its funds, clients, and trusts submitted a petition asking for a fair value of appraisal for the shares that they owned. The Delaware Court of Chancery issued its ruling stating that the fair value per Dell share was $17.62/share.
The mistake happened when T. Rowe voted for the merger instead of against it even though it opposed the deal. The court said that it was this vote that made T. Rowe’s Dell shares not eligible for the higher share value—hence the $194M payment now.
It was last month that a Delaware judge ruled that Michael Dell and Silver Lake Partners lowballed their $24.9B buyout of Dell Inc. by approximately 22%—that’s $6B. The judge said that Dell and Silver Lake could have to pay investors that opposed the deal tens of millions of dollars. T-Rowe and other hedge funds are among those that sued, claiming that the Dell deal was not priced properly.
In this particular lawsuit, known as an appraisal case, the Dell investors had sought to get $28.61/share. Vice Chancellor Travis Laster, however, said that the fair value was $17.62/share, which is still more than the $13.75/share deal price. He also noted that the Dell buyout sought to avail of a drop in the company’s stock price and that the company’s board never figured out the intrinsic value before going into negotiations. His ruling will add about $36M to the buyers’ cost.
The decision affects about 5.5M Dell shares. Other investors who sought appraisal of their Dell shares to see if they were worth more could collect about $20.84/share including interest.
At The SSEK Partners Group, our institutional investor fraud law firm is here to help high net worth individual investors and institutional investors to recoup their losses. Over the years we have helped thousands of our clients to get their money back. Sometimes the reason for the investor losses is fraud. In other cases, it has been because a firm or one of its financial representatives made a mistake or was negligent in some other way.
Contact our securities lawyers today.
T. Rowe Price to take $194 million charge due to voting error on Dell LBO, Forbes/Yahoo, June 6, 2016
U.S. court rules $24.9 billion Dell buyout underpriced by 22 percent, Reuters, June 1, 2016