Dell Takes Aim At Muddled Vote In Shareholder Appraisal Fight

By Peter Hall

Law360, Wilmington (August 7, 2015, 9:36 PM ET) -- Dell Inc. urged the Delaware Chancery to throw out petitions seeking appraisal of its stock, saying it's now clear that although several of its largest investors publicly opposed the computer maker's $25 billion go-private deal, they’re barred from seeking an adjustment because their stockholder of record voted in its favor.

In a brief supporting its summary judgment motion made public Thursday, Dell says discovery has revealed that although T. Rowe Price Associates Inc. directed its funds to vote their shares against the 2013 merger, an intermediary's proxy system contained incorrect instructions.

As a result, the funds' record stockholder, Cede & Co., through a chain of proxies, actually voted the shares in favor of Dell founder Michael Dell's buyout, the company says in the heavily redacted brief, which was first filed under seal July 30.

Although 13 mutual funds involved in the transaction reported the vote as required by federal securities regulations, T. Rowe Price did not discover the voting issue for more than a year after the fact, Dell's brief says.

Dell says it has learned through discovery and interrogatories that in late 2014, T. Rowe Price and proxy advisory firm Institutional Shareholder Services conducted an investigation that revealed within a few days the T. Rowe funds' shares had been voted for the merger.

“These facts make clear that the subject petitioners' assertion that it is 'not possible to know how the record holder actually voted the specific shares attributed to any specific individual beneficial owners of Dell shares,' is incorrect,” the Dell brief says.

If Dell succeeds in having T. Rowe Price’s appraisal demand tossed over the issue, it would eliminate one of the largest shareholders challenging the price of the deal, which is set to go before the Chancery Court for a fact trial in October.

Dell argues the fact that the record holder of the funds' shares voted in favor of the buyout deal disqualifies them from seeking an appraisal under Delaware law.

“A dissenting stockholder's failure to comply strictly with the technical requirements of the appraisal statute — such as the requirement that the stockholder not vote in favor of the transaction — are not excusable, irrespective of the equities,” Dell argues.

The brief also argues that the petitioners cannot rely as a remedy on votes against the merger cast by the same intermediary, Broadridge Financial Solutions, on behalf of other clients. Dell notes the Delaware Supreme Court has rejected the notion that shares held by a single broker on behalf of multiple clients are fungible.

And Dell argues that the petitioners cannot claim the inadvertent votes were the result of Dell's proxy language or negligence on the part of ISS.

The appraisal action was first lodged in October 2013 by Cavan Partners — which held 100 shares, according to court records — and the case was eventually consolidated with dozens of other shareholders claims.

A majority of Dell shareholders approved the buyout a month earlier, after then-Chancellor Leo E. Strine Jr. upheld last-minute tweaks by Dell's board to voting rules and record date, dousing a stiff and well-publicized opposition campaign.

T. Rowe Price counsel Stuart M. Grant declined to comment on the filing Friday.

The asset managers are represented by Stuart M. Grant, Michael J. Barry, Christine M. Mackintosh, Jennifer A. Williams and Rebecca A. Musarra of Grant & Eisenhofer PA.

Dell is represented by Gregory P. Williams, John D. Hendershot, Susan M. Hannigan and Andrew J. Peach of Richards Layton & Finger PA and John L. Latham, Susan E. Hurd, Gidon M. Caine and  Charles W. Cox of Alston & Bird LLP.

The case is In re: Appraisal of Dell Inc., case number 9322, in the Court of Chancery of the State of Delaware.

--Editing by Kelly Duncan.

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