T. Rowe Price (TROW) said Monday that it will pay some $194 million to clients to compensate them for a botched proxy vote made during the 2013 leveraged buyout of Dell.
At the time, about 31 million shares of the Texas-based computer maker were held in several of the group’s portfolios and accounts, including mutual funds, trusts, separately managed accounts and subadvised client accounts. T. Rowe’s investment team viewed Dell’s shares at the time, priced at $13.75, as “significantly undervalued.”
Due to a proxy voting error, though, voting instructions for the shares were submitted as “for” the merger rather than “against.”
On May 11, a Delaware court ruled that this voting error rendered T. Rowe Price’s fund, trust and client shares ineligible to pursue fair value. It then decided on May 31 that Dell’s fair value per share was $17.62.
“Since this situation began, our focus has been on securing fair value from the Dell buyout for our clients. The court’s determination that the original buyout consideration offered by Dell was too low validated our original investment view,” said T. Rowe Price President & CEO William Stromberg, in a statement.
The fund group says it will make payments to affected clients “to compensate them for the difference in valuation, plus statutory interest, resulting from the denial of appraisal rights.”
As a result, T. Rowe Price plans to record a onetime charge of some $194 million in the second quarter. This should reduce net income, after tax, by about $118 million — or roughly $0.46 in diluted earnings per share, it says.
T. Rowe Price funds and portfolios that will receive payments include the Equity Income Fund, Institutional Large-Cap Value Fund, Science & Technology Fund, Equity Income Portfolio, Equity Income Trust, U.S. Equities Trust–Large-Cap Value and U.S. Large-Cap Value Equity Fund–SICAV.