FT : Emerging markets: Wealth dips in Brazil and China

Eike Batista, one-time richest man in Brazil, is not the only former billionaire in the developing world. His spectacular rise to outrageous fortune has been followed by an even more spectacular collapse into personal bankruptcy. Mr Batista was undone when his oil company failed to find any of the black stuff, sparking a cash crunch across his network of companies.

But the wider slowdown in Brazil’s economy also hurt him, as it has hundreds of others in the ultra-wealthy bracket – generally defined as people with net assets of at least $30m. It might seem unnecessarily elitist to focus only on the waxing and waning wealth of a global group of just 199,235 people, but this is exactly where the world’s private banks put their efforts. Individuals with just $5m or $10m do not have enough cash to play with to cover the costs of the highest level of private service.

Brazil was one of less than a dozen countries that saw the number of its super-rich decline this year, according to an annual report by Wealth-X and UBS. More than 600 people dropped out of this league in Brazil, as the total assets of this group fell almost $100bn from 2012 to $770bn. China, the next biggest loser, lost almost 600 multimillionaires and the group’s total assets fell by $65bn to $1.5tn. The other two Bric nations, Russia and India, registered a small rise in ultra-rich numbers and wealth. All the other countries that saw their ultra-wealthy populations shrink were also emerging markets, apart from Canada and Finland. Chile, Colombia, Kazakhstan, Peru, South Africa, Syria and Tunisia all lost members of their super wealthy clubs, according to Wealth-X. Developed countries by contrast did rather well. Germany saw more than 2,000 people join or re-enter this league, while Europe as a whole added almost 5,000 and the US gained more than that. These two blocs between them added $1.5tn in assets this year – as much as all Chinese super-rich hold. The total wealth of the US and European ultra rich is a staggering $16.76tn, out of a global total of $27.77tn. Recovery in equity markets and other asset prices because of the flood of central bank money is behind most of this growth in wealth rather than fresh entrepreneurial success or economic growth. For private banks, however, the emerging markets still merit close attention. Bassam Salem, chief executive of Citi’s private bank in Asia, says the emerging markets of the Middle East, Latin America and Asia make up roughly half the global private banking business and will pull ahead of the developed world. “The emerging economies are slowing, but they are still producing better growth than the developed world,” he says. Wealth among the rich in emerging markets has grown with great rapidity in recent years, even if it is stuttering slightly now. The Middle East has continued to boom, adding more than 700 to its super-rich population and $170bn in assets. However, it is often harder than people expect to make money out of the wealthy in emerging markets, Mr Salem reckons, because much of their wealth is often tied up in their businesses, while the costs of running a private bank in terms of property, people and regulatory compliance are high and increasing. Staff – especially the vital relationship managers – can be very expensive in Asia and other emerging markets, because they are in very short supply. Barend Janssens, head of emerging markets at RBC Wealth Management, says the talent shortage is a big inhibitor to private banks. “Good private bankers who speak local languages and understand local customs are highly sought after, and with demand for their skills higher than supply, costs are going up,” he says. “The industry needs to find a way to groom talent in sufficient numbers to keep up with high client demand.” The demand is there and should keep growing – in spite of this year’s hiccups. Roland Berger, the strategy consultancy, predicts that global bankable assets will grow to almost €40tn by 2017, from €29tn at the end of 2012. The fastest growth, it predicts, will come from Asia-Pacific, which it forecasts will see assets increase by 10 per cent annually to reach about €14tn by 2017. UBS for one still sees Asia as the most promising market in the years ahead. Kathryn Shih, head of UBS Wealth Management Asia Pacific, says it will see the fastest growth out of all the emerging markets. “Asia-Pacific has been growing faster than other emerging markets because it has had more political stability, which promotes economic stability,” she says.

>>> ACS chairman seeks Middle East investors

ACS chairman seeks Middle East investors

ACS Chairman Florentino Perez, has held meetings with investors in the Middle East to try to get them to invest in the listed Spanish construction and services company, Vozpopuli said. The Spanish-language report cited a comment made by the Abu Dhabi entrepreneur Mansour bin Zayed [deputy prime minister of the United Arab Emirates] in his social networks.

Perez is seeking new partners after the recent stock sales by the March family – who operate through the vehicle Corporacion Alba - and his distancing from the investors Alberto Alcocer and Alberto Cortina, according to the unsourced report.

Mansour bin Zayed is a member of the Abu Dhabi Investment Authority management board, the report noted.

Perez also wants to open for ACS the region’s emerging infrastructures market, particularly in the United Arab Emirates, the report added.

Source Vozpopuli

>>> Avio Spazio: Finmeccanica to choose between EADS and Thales as partner- repo

Avio Spazio: Finmeccanica to choose between EADS and Thales as partner

Finmeccanica, the listed Italian defence group, will choose either EADS or Thales as a partner to to bid for Avio's space division, Avio Spazio, Italian language daily La Repubblica reported. The unsourced report said that Finmeccanica has told both EADS and Thales that it wants to hold 51% of Avio Spazio after any transaction.

The report said that the condition could be a deal breaker for EADS. The item added that a deal with Thales could fall through if the French defence group insists on taking over Ansaldo STS, the railway signaling manufacturer controlled by Finmeccanica in exchange for letting Finmeccanica have a majority stake in Avio Spazio.

The report noted Cinven, the private equity firm, is seeking to sell its 81% stake. The report said Finmeccanica already holds 14.3% of Avio Spazio.

The report claimed that the Cinven stake is valued at EUR 90m

The report noted Avio Spazio had a turnover of EUR 285m in 2012.

>>> What to look at today

US Market closed higher with NAsdaq leading again the move ahead of black Friday ...All big Tech names have been leading the move...AAPL, ORCL, INTC,HPW,... VIX @ 12.98 +1.33%...volume were very light @ 407mil shares...Brazil+0.81% ( Brazil continued to tighten policy, as Selic target rate hit 10% following today's 50bp hike. Central bank said the decision was unanimous. Notably, it also removed its prior reference forecasting runaway inflation taking to a downward path...China YTD industrial profits growth was slightly higher, but October growth slowed..Japan retail sales data were mixed, with Oct m/m trade falling for the first time in 3 months while y/y rose above expectations. USD/JPY sold off slightly...Nikkei +1.80%...Shnaghai +0.9%

Eur$ 1.3570 S&P Fut +0.1% European Fut - Unch.

Keep an eye on :

- ACA FP : Credit Agricole to Close 50 Branches by 2015: Les Echos - ACS SM : ACS chairman seeks Middle East investors - AOIL SS : Sweden to Investigate Alliance Oil Charity Donations, DI Says - BIM FP : Biomerieux Ends Molecular Biology Pact With Biocartis - BMPS IM : Monte Paschi Main Investor Acknowledges Share Sale Proposal - DTE GY : Deutsche Telekom CEO Says It’s Time for Europe Industry Mergers - EOAN GY : EON Looks to Sell Italy Business, May Fetch >EU2b: Handelsblatt - FNC IM : Finmeccanica Seeks 51% of Avio Space, Repubblica Says - G IM : Generali Balance Sheet Issue Only Moderately Addressed: Nomura - IAG LN : Listed as top European call by MS - IHG LN : Listed as top European call by MS - KWS GY : KWS Saat 1Q Rev Falls 9%, Net Loss Widens; Confirms FY14 Targets - LLOY LN : Listed as top European call by MS - MEO GY : Listed as top European call by MS - NOK1V FH : Nokia Asset Transfer to Microsoft to Result in India Tax: BTVI - PMO LN : Premier Oil 2013 Production Forecast Unchanged - PUB FP : Publicis Acquires 75.1% of U.K. Agency Walker Media; No Terms - REP SM : YPF CEO Says Repsol Deal to Open Foreign Investment: Reuters - RNO FP : Renault Urges S. Korean Unit to Lower Labor Costs: Chosun Ilbo - SSABA SS : Listed as top European call by MS - TSCO LN : Tesco Plans Same-Day Delivery Amid Grocer Rivalry: Guardian Link - UBSN VX : Credit Suisse, UBS Create Swiss Finance Council - VIE FP : Listed as top European call by MS - WPP LN : WPP Growth Improving, UBS Says; Raises Organic Growth Ests, PT - ZIGGO NA : Morgan Stanley Reports 7.39% Long Position in Ziggo: AFM Filing

>>> Brokers Up & Down

Up

*ANGLO AMERICAN RAISED TO HOLD VS SELL AT LIBERUM *ASPO RAISED TO HOLD VS SELL AT NORDEA *BOLIDEN RAISED TO OVERWEIGHT VS EQUALWEIGHT AT MORGAN STANLEY *CAIRN ENERGY RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN *COMMERZBANK RAISED TO EQUALWEIGHT AT MORGAN STANLEY *D/S NORDEN RAISED TO HOLD VS SELL AT NORDEA *FLUGHAFEN ZUERICH RAISED TO OUTPERFORM AT RBC CAPITAL *NOVO NORDISK RAISED TO BUY VS HOLD AT KEPLER CHEUVREUX *OLD MUTUAL RAISED TO OUTPERFORM VS MARKET PERFORM AT BERNSTEIN *SAINT-GOBAIN RAISED TO NEUTRAL VS UNDERPERFORM AT EXANE

Down

*AUSTRIAN POST CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN *BARLOWORLD CUT TO SELL VS HOLD AT DEUTSCHE BANK *CEWE COLOR CUT TO HOLD VS BUY AT DEUTSCHE BANK *COMPASS GROUP CUT TO NEUTRAL VS BUY AT CITI **IMI CUT TO HOLD VS ADD AT NUMIS *METKA CUT TO NEUTRAL VS BUY AT CITI *REMY COINTREAU CUT TO SELL VS HOLD AT SOCGEN *REMY COINTREAU CUT TO SELL VS NEUTRAL AT CITI *VOLVO CUT TO UNDERWEIGHT VS EQUALWEIGHT AT MORGAN STANLEY

PT Change

*GENERALI PT RAISED TO EU16.5 VS EU14.7 AT UBS; KEPT AT NEUTRAL *KCOM CUT TO UNDERPERFORM VS NEUTRAL AT EXANE *NYRSTAR PT CUT TO EU2.10 FROM EU3.25 AT ING *OMV PT Raised to EU35 vs EU34 at Raymond James

Initiation

*DEBENHAMS RATED NEW HOLD AT JEFFERIES, PT 95P *EVOLVA RATED NEW OUTPERFORM AT CREDIT SUISSE, PT SFR1.60 *EVONIK INDUSTRIES RATED NEW BUY AT BERENBERG; PT EU34 *H&M RATED NEW UNDERPERFORM AT JEFFERIES, PT SEK245 *INDITEX RATED NEW BUY AT JEFFERIES, PT EU135 *MARKS & SPENCER RATED NEW HOLD AT JEFFERIES, PT 530P *NEXT RATED NEW BUY AT JEFFERIES, PT 6,300P *NYRSTAR RATED NEW SELL AT SOCGEN; PT EU1.3 *PIRAEUS BANK RATED NEW NEUTRAL AT CITI *RCS RESUMED AT NEUTRAL AT MEDIOBANCA; PT EU1.39 *ROYAL MAIL RATED NEW NEUTRAL AT GOLDMAN, PT 610P

Country Sector Stock Call

*SECURITAS, DKSH REMOVED FROM UBS’S MOST PREFERRED LIST *SERCO ADDED TO UBS’S MOST PREFERRED LIST *MS TOP Europe REco : InterContinental Hotels, Int’l Consolidated Airlines Group, Lloyds Banking Group, Metro, SSAB, Veolia Environnement

>>> Morgan Stanley Lists Top Global Stock Recommendations

* Asia ex-Japan: Great Wall Motor, KT&G, MediaTek, Sun Pharmaceutical, WeiChai Power. * Japan: Mazda Motor, Mitsubishi Electric, Nippon Steel & Sumitomo Metal, Orix, Takeda Pharmaceutical, Yamaha Motor * Europe: InterContinental Hotels, Int’l Consolidated Airlines Group, Lloyds Banking Group, Metro, SSAB, Veolia Environnement * North America: Calpine, Canadian Pacific Railway, CBS Corp., Cobalt International Energy, FMC Technologies, Linear Technology, Michael Kors Holdings, Terex, 21st Century Fox

>>>Asia Update

Asian Market Update: China Industrial Profits growth slows; Australia Q3 CAPEX much higher than expected and FY13/14 forecast upgraded

***Observations/Insights*** - Brazil continued to tighten policy, as Selic target rate hit 10% following today's 50bp hike. Central bank said the decision was unanimous. Notably, it also removed its prior reference forecasting runaway inflation taking to a downward path. - China YTD industrial profits growth was slightly higher, but October growth slowed. NBS survey from 41 industries saw 35 posting y/y YTD profit growth, 5 saw their profits fall, while the oil refining, coking and nuclear fuel processing sector recovered from recent losses. - Japan retail sales data were mixed, with Oct m/m trade falling for the first time in 3 months while y/y rose above expectations. USD/JPY sold off slightly on the news, with markets expecting a more definitive surge in consumer activity ahead of the Apr rise in consumption tax. - Australia Q3 capital expenditures were much better than expected. Q3 rose 3.6% q/q, while the latest estimate for FY13/14 was ratcheted higher to A$166.8B vs A$159.2B prior forecast. Even though that figure is down 2% on y/y basis, AUD was up sharply on the data.

***Economic Data*** - (CN) CHINA OCT INDUSTRIAL PROFITS Y/Y: 15.1% V 18.4% PRIOR; YTD: 13.7% V 13.5% PRIOR - (AU) AUSTRALIA Q3 PRIVATE CAPITAL EXPENDITURE Q/Q: +3.6% V -1.2%E - (AU) AUSTRALIA OCT HIA NEW HOME SALES M/M: -3.8% V +6.4% PRIOR (first decline in 3 months) - (JP) JAPAN OCT RETAIL SALES M/M: -1.0% V -0.8%E (1st decline in 3 months); Y/Y: 2.3% V 2.1%E; LARGE RETAILERS' SALES Y/Y: -0.4% V -0.1%E (biggest decline in 3 months) - (JP) Japan investors bought net ¥1.41T in foreign bonds last week vs bought net ¥349.9B in prior week (7th straight week of net purchases) - (NZ) NEW ZEALAND NOV ANZ BUSINESS CONFIDENCE: 60.5 V 53.2 PRIOR (multi-year high); ANZ ACTIVITY OUTLOOK: 47.1 V 47.1 PRIOR - (KR) SOUTH KOREA SEPT CURRENT ACCOUNT BALANCE: $9.51B (record high) V $6.57B PRIOR; GOODS BALANCE: $7.03B V $5.70B PRIOR - (TH) THAILAND OCT MANUFATURING PRODUCTION Y/Y: -4.0% V -2.9%E - (PH) PHILIPPINES Q3 GDP Q/Q: 1.1% V 1.3%E; Y/Y: 7.0% V 7.1%E - (BR) BRAZIL CENTRAL BANK (COPOM) RAISES SELIC TARGET RATE BY 50BPS TO 10.00%, AS EXPECTED

***Fixed Income/Commodities/Currencies*** - JGB: (JP) Japan MoF sells ¥2.67T in 0.1% 2-yr notes, Avg Yield: 0.086% v 0.094% prior; bid to cover: 6.53x v 7.96x prior - (CN) PBoC to inject CNY19B in 14-day reverse repos; Injects CNY17B this week (2nd consecutive net injection) v injected CNY59B prior - GLD: SPDR Gold Trust ETF daily holdings fall 5.7 tonnes to 843.2 tonnes (lowest since Jan 2009) - SLV: iShares Silver Trust ETF daily holdings fall to 10,309 tonnes (lowest level since 10,284 on Jul 23rd) from 10,330 tonnes - update as of 11/26

- USD/JPY hit session lows below the ¥102 handle in the opening hour of trade in Tokyo, down just over 20pips from the highs, following mixed retail trade data from Japan. AUD outperformed across the board, rising over 60pips against the greenback above 0.9130 and also coming off its 4-year lows against the Kiwi to test NZ$1.12. Cable is up about 50pips in later afternoon trade above $1.6320 ahead of the BOE financial stability report.

***Speakers/Political/In the Papers*** - (CN) China Iron and Steel Association (CISA): China mid Nov avg crude steel production 2.13M tonnes , -0.57% from early Nov - (CN) China International Capital Corp (CICC) raises China 2014 GDP target to 7.6% v 7.4% prior (3rd raise since Sep 2nd) - (CN) China Central Finance and Economy Leading Team Official Yang: China urbanization pace has been too fast and unhealthy - (CN) China Ministry of National Defense (MOD) spokesperson Yang: China sets up air defense zone to deal with possible air threats and to ensure air safety - comments from MOD Q&A session - (CN) China fuel price change window may start on Nov 29th; Analysts estimate to raise by approx CNY120-150/ton (first rise after three consecutive cuts) - financial press - (CN) China State Council issues policy to curb disorderly coal growth- Chinese press

- (JP) Japan Chief Cabinet Sec Suga: Japan defense ministers agreed to respond resolutely, calmly to China's moves to change status quo; Want to have a unified response with US officials - (JP) Japan PM Abe adviser Taniguchi: China air zone is against international norms - financial press interview

- (NZ) New Zealand RBNZ Publishes Assessment on low-deposit lending: Data indicated a drop in high LVR lending - (KR) Bank of Korea (BOK): Local banks' average lending rates on new household loans in Oct fell by 0.08pts to 4.46%; record low and 3rd consecutive month of decline - Korean press - (KR) According to South Korea's Financial Supervisory Service (FSS), loan delinquency ratio for Korea's 18 local banks in Oct rose 0.07pts to 1.07% - Korean press

***Equities*** Market Snapshot (as of 04:30 GMT): - Nikkei225 +1.2%, S&P/ASX +0.1%, Kospi +0.8%, Shanghai Composite +1.3%, Hang Seng +0.6%, Dec S&P500 +0.1% at 1,806, Feb gold +0.1% at $1,239, Jan crude oil -0.2% at $92.16/brl

US markets: - VZ HPQ: US Health and Human Services Dept (HHS) said to replace Verizon for webhosting services on Healthcare.gov due to ongoing problems with Obamacare online registration; services to be replaced by Hewlett-Packard; -0.1% afterhours

Notable movers by sector: - Consumer discretionary: SEEK Ltd SEK.AU +5.7% (provides FY14 guidance); Qantas Airways Ltd QAN.AU +1.7% (possible changes to ownership restrictions); Collins Foods CKF.AU +5.5% (H1 results) - Consumer staples: China Huishan Dairy Holdings Co Ltd 6863.HK -2.8% (H1 results) - Industrials: Suzuki Motor Corp 7269.JP +2.1%, Mitsubishi Motors 7211.JP +0.6%, Nissan Motor 7201.JP +0.8%, Mazda Motor Corp 7261.JP +1.7% (Oct production results); Siasun Robot & Automation Co Ltd 300024.CN +1.0% (awarded order); Huayi Electric Co Ltd 600290.CN +1.7% (awarded order); Aerosun Corp 600501.CN +10.0% (to expand in defense related business) - Materials: Mount Gibson Iron MGX.AU -2.4% (provides FY14 outlook) - Technology: GRG Banking Equipment Co Ltd 002152.CN +5.7% (awarded order); Tradelink Electronic Commerce Ltd 536.HK +1.2% (awarded order); Wisesoft Co Ltd 002253.CN +1.3%, Sichuan Haite High-tech Co Ltd 002023.CN +4.6% (CAAC to loosen private pilot licenses); RENN: Reports Q3 -$0.07 v -$0.09e, R$47.6M v $48.3Me; -10.5% afterhours - Energy: China Shenhua Energy 1088.HK +1.2%, China Coal Energy 1898.HK +0.9%, Yanzhou Coal 1171.HK +1.3%, Shanxi Xishan Coal 000983.CN +2.2% (China to curb disorderly coal growth) - Utilities: Korea Electric Power Corp 015760.KR -2.9% (nuclear reactor halted)

FT : ECB warns of risks posed by Fed tapering

ECB warns of risks posed by Fed tapering

The European Central Bank on Wednesday issued a stark warning over the threat posed by the scaling back of US monetary stimulus, calling on eurozone policy makers to do more to prepare for the market shocks from Federal Reserve "tapering". In its latest financial stability report, the ECB said the risks to the eurozone’s financial system from outside the currency bloc had grown since May due to the Fed’s talk of scaling back its $85bn of monthly bond purchases – despite a general improvement in market conditions. "Starting in May, there was a significant repricing in global bond markets, which took place largely because of changing monetary policy expectations in the United States – with increased foreign exchange market volatility and stress borne largely by emerging market economies," the ECB said. The Fed could taper as early as December if crucial jobs numbers due next week show enough momentum in the US labour market. Economic data released on Wednesday were mixed: a strong Chicago manufacturing index – which came in at 63, above consensus forecasts of 60 – was offset by a fall in durable goods orders. After sending shockwaves through global financial markets this summer, the Fed came under international pressure to communicate more clearly, but its mandate to focus on employment and inflation in the US means it does not consider the ripple effect of its decisions overseas. The ECB said the eurozone’s institutional investors were more exposed to bond markets than the region’s banks, but that it was difficult to know where the risks of ultimate losses were greatest. "It cannot be ruled out that ultimate exposures are concentrated among a limited number of entities which may now be more vulnerable to any further severe market shock," the ECB said. It added that the recent turbulence meant that policy makers needed to ensure banks, insurers and pension funds could cope with a "normalisation" of yields from their current historically low levels. "Stable and predictable" macroeconomic policies by member states, as well as measures such as the ECB’s forward guidance to markets and the public on interest rates, would help smooth the exit from central banks’ exceptional monetary easing without an abrupt rise in global bond yields, the central bank said. In the latest edition of its twice-yearly report, the ECB said risks of turbulence from within the euro area had receded since its previous report was published in May, despite the turbulence caused by the Fed chair Ben Bernanke’s comments that the US central bank would begin to cut back on its bond buying once the world’s largest economy neared a full recovery. The ECB said weak bank profitability and persistent financial fragmentation still presented a threat to stability. Banking union would be "an important contribution" to resolving these hurdles. The ECB said the improvement in overall conditions in part reflected better economic fundamentals on the back of fiscal and structural reforms. But a lack of reform in the months ahead threatened to derail these improvements, raising tensions in sovereign debt markets. Unforeseen bank recapitalisations also posed a threat. "Although provisioning is increasing, it has barely kept pace with the deterioration in asset quality, on average, highlighting a potential further need for additional reserves to strengthen bank balance sheet resilience in case asset quality deteriorates further." The ECB cut its main refinancing rate earlier this month to a record low in a fresh bid to bolster the currency bloc’s shaky economic recovery and said there were still further tools it could use. Speaking in a press conference on Wednesday, Vítor Constâncio, the ECB’s vice-president, appeared to downplay the likely use of one of those tools: cuts that would push the ECB’s deposit rate into negative territory. Such a move could only be considered in "extreme situations" he said, while reiterating that the ECB was technically prepared to cut the rate, which is now at zero. Mr Constâncio noted that negative rates had been used in Denmark, but he said it was a different matter introducing them in a large economy such as the euro area. Discussing the finances of the euro area banks, Mr Constâncio said that profits had been driven sharply down by the cost of provisioning for non-performing loans. This situation had been "aggravated" by banks boosting their provisions as they prepared for the forthcoming comprehensive assessment of the banking system that will be conducted by the ECB, he said. This was likely to be a temporary situation, he argued, predicting that the comprehensive assessment would dispel remaining doubts about the robustness of euro area banks. The exercise is essential to rebuilding trust in the banks and reducing the fragmentation of the region’s financial system, he added. The ECB would do the exercise in a "very vigorous and credible way" he said, acknowledging that the reputation of the planned Single Supervisory Mechanism was at stake.

>>>US After Hours

After Hours Summary: No notable movers on earnings/guidance

After Hours Gainers: Companies trading higher in after hours in reaction to news: ZOOM +133.3% (to acquire Beijing Tonglian Information & Technology), DSS +10.1% (filed patent lawsuit against Apple (AAPL)), HNR +2.4% (announced issuance of ~1.7 mln shares of common stock for ~$5.37 mln), SNX +0.6% (completed new financing arrangements; integration of IBM's $1.2 bn+ CRM BPO Business is on track), TASR +0.4% (disclosed it settled two pre-2009 product liability lawsuits)

After Hours Losers:

Companies trading lower in after hours in reaction to news: IPCI -9.2% (announced ~5.305 mln share at-the-market offering of common shares), FTNT -4.5% (announced CFO transition), PXD -1.6% (announced severe winter weather has impacted production and drilling operations in Texas), NAT -0.4% (announced it has created a new offshore supply vessel company, Nordic American Offshore Ltd.)

WSJ :Dell Investors Line Up For Court Appraisal

Dell Investors Line Up For Court Appraisal

T. Rowe, Magnetar Among Those Reserving Right To Seek Appraisal In Dell Buyout

Investors with claims on more than 47.5 million Dell Inc. shares have reserved the right to ask a judge to award them more than the buyout price, in the latest example of investors trying to use the courts to nab a better outcome in a deal.

The investors, named in a filing by Dell this week in Delaware court, in September voted against the company's sale to Michael Dell and private-equity firm Silver Lake Partners, and sent a letter to the company preserving their right to seek so-called appraisal of their shares. Most have not yet actually done so.

They have until about the end of the year to change their mind and take the cash offered in the deal. Or, if they don't, they have another two months after that to bring an appraisal claim in court.

Appraisal is a legal process that lets shareholders who voted against a cash-out deal ask a judge to determine the fair value of their stock. It has recently become a more popular strategy for hedge funds and other investors willing to wager they can get more in court. Downsides of the strategy include the risk of getting less from a judge and the time waiting for the court to decide.

The largest holder on the list is T. Rowe Price Group Inc. TROW +0.48% (TROW), which currently holds more than 30 million shares across its own funds and about a million more on behalf of clients, according to the court filing.

Other large investors angling for appraisal include the New York state Common Retirement Fund, with 4.3 million shares, and affiliates of John Hancock Life Insurance Co. and hedge fund Magnetar Capital LLC, with about 3.8 million each, the filing said.

Dell has challenged the validity of potential appraisal claims for more than 6.2 million of the shares, mostly claiming that the investor in question didn't satisfy a requirement to hold the stock continuously in the weeks leading up to the deal's closing. A spokesman for Dell declined to comment beyond the filing.

Dell's $25 billion buyout narrowly survived a shareholder insurgency rallied by Carl Icahn and Southeastern Asset Management Inc. Mr. Icahn urged shareholders to seek appraisal but said last month that he would take the deal cash instead.

Southeastern sold about half its approximately 8% stake to Mr. Icahn in June at a discount to the then $13.65-per-share offer price. Southeastern doesn't appear on the court-filed list of investors, suggesting it sold the remainder of its stake into the deal. A representative wasn't immediately reached for comment.

Mr. Dell and Silver Lake closed their acquisition of the technology company Oct. 30, hoping to continue in private its shift from a PC maker to a provider of corporate software and services.

T. Rowe Price, Magnetar and the other Dell investors are the latest to see potential upside in appraisals. Hedge-fund firms like Merion Investment Management LP, Hudson Bay Capital Management LP and Merlin Partners LP are testing their luck challenging recent deals including KKR & Co.'s (KKR) acquisition of Gardner Denver Inc., BMC Software Corp.'s private-equity buyout, and Dole Food Co.'s sale to its founder.