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.