T. Rowe Price Fights To Stay In Dell Stock Appraisal Case

By Matt Chiappardi

Law360, Wilmington (March 18, 2016, 9:15 PM ET) -- T. Rowe Price urged the Delaware Chancery Court on Friday not to accept Dell’s argument that its shares are ineligible for judicial appraisal, contending that it consistently opposed the computer giant’s $25 billion take-private deal even though a “computer glitch” made it vote in favor.

During a hearing in Wilmington, T. Rowe Price Associates Inc. attorney Stuart M. Grant of Grant & Eisenhofer PA argued that the analysis doesn’t have to simply stop at how the shares were voted, but the Chancery Court can examine a shareholder’s actual intent and look at the circumstances surrounding the voting instructions to do it.

Under Delaware law, shareholders can seek appraisal of their shares after a change-of-control transaction, provided they did not vote for, or publicly support, the deal, and T. Rowe Price, one of the largest stockholders seeking an adjustment, maintains it has steadfastly opposed Michael Dell’s take-private bid.

But T. Rowe Price’s funds, through a series of proxies, voted for the deal, despite instructions to cast ballots against, and in court Friday, Grant argued that the investment management firm’s votes didn’t affect the outcome and that its intent ought to be honored.

“There is no equitable reason whatsoever to deny them appraisal,” Grant told Vice Chancellor J. Travis Laster.

Dell stuck to its position that T. Rowe Price was not eligible to be part of the massive appraisal action of the take-private deal, in which the petitioning shareholders are arguing the computer giant’s stock was worth twice the deal consideration, because the results of their vote are all that matters under the applicable Delaware law.

If there was some sort of mistake over what happened with T. Rowe Price’s vote, that’s not relevant to the First State law that governs judicial appraisal, Dell attorney John D. Hendershot of Richards Layton & Finger PA said in court.

“The issue here is the vote,” Hendershot said. “It’s not the shareholder’s intent.”

Hendershot argued that if the Chancery Court were to allow T. Rowe Price to be eligible for appraisal, it could open the door to shareholders making tactical moves where they publicly oppose a merger and then somehow vote in favor with impunity.

Grant countered that in this instance, T. Rowe Price’s ballots were not even close to being a swing vote, and that Hendershot’s arguments actually bolstered his point that the court should have the ability to consider factors beyond how the shares were voted.

“What are we going to do when someone really wants to rig the system?” Grant said.

The unusual issue is yet another way the Dell case is testing the edges of Delaware law that governs judicial stock appraisal, and no matter how Vice Chancellor Laster rules, it will almost certainly be appealed to the Supreme Court.

Dell first broached the issue of T. Rowe Price’s votes when it made a surprise revelation during a routine hearing in May and pushed to take discovery to figure out what happened.

Months later, the computer giant urged the court to throw out T. Rowe Price’s appraisal petition and thus eliminate its largest challenger, on grounds that although the investment management firm directed its fund to vote against the transaction, an intermediary's proxy system contained incorrect instructions and the funds' record stockholder, Cede & Co., through a chain of proxies actually cast ballots in favor.

T. Rowe Price argues that Dell was constructing a “gotcha” argument based on a “computer glitch,” but the technology giant maintains that under the technical requirements of Delaware appraisal law, T. Rowe Price must be disqualified; otherwise, it would mean there really was no voting requirement in the statute.

Vice Chancellor Laster has also delved into another unusual statutory issue in the case when he reluctantly ruled a group of funds, including a T. Rowe Price fund, technically lost their appraisal rights when they retitled them in the name of the Cede & Co., the Depository Trust Co.'s partner and nominee.

In his July opinion, the vice chancellor said that an approach more closely tied to federal law would be "preferable," but noted he was bound to Delaware law.

Meanwhile, the vice chancellor is also still mulling the actual appraisal of the Dell stock, which went before him in a five-day trial in October.

The deal price came in at $13.75 per share, but petitioners argue the actual value is more than twice as much — $28.61 per share — meaning Dell left $26 billion in value on the table.

In post-trial arguments, both sides lobbed barbs at the other’s valuation expert, arguing their analyses were “unreliable,” Dell’s because he “manipulated” data, and the petitioners’ because he used untested assumptions.

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

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

--Editing by Philip Shea.

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