According to Channel News Asia , Dell has become the latest victim of a process called “appraisal” where hedge funds use the threat of a court room to squeeze more money from buyouts.
The plan strategy, known as “appraisal,”involves an investor who opposes a buyout price asking a judge to determine the fair value for the stock. Dubbed “dissenter’s rights” and is meant to protect investors from underpriced buyouts, but some Wall Street dealmakers say hedge funds use it as a hold-up strategy to squeeze extra cash from mergers.
In this case the investor, T Rowe Price, is seeking a higher price for its Dell stock than the US$13.75 per share offered in the US$26 billion buyout led by Michael Dell and Silver Lake Partners.
T Rowe Price’s case began in February 2014 when the company asked Delaware judge Travis Laster to appraise its roughly 27 million Dell shares, according to court records. It said it had notified Dell and had not voted its stock for the deal, satisfying the legal requirements for appraisal.
But in August T Rowe Price reported to securities regulators in August that it voted for the deal across its funds.
Dell’s lawyer said that the computer maker would soon begin “aggressive, limited discovery” into the fund manager’s vote and will probably ask the court to throw out T Rowe Price’s appraisal claim.
But T Rowe Price is one of scores of Dell holders to seek appraisal claims, covering more than 38 million shares in total, according to court records.