Dell's private buyout shortchanged shareholders, court rules

The company was worth more than Michael Dell and Silver Lake Partners paid

20151027 openworld dell sign
Credit: Stephen Lawson

Michael Dell and Silver Lake Partners paid about 22 percent too little for Dell when they took the company private in 2013 and will have to pay millions of dollars more to shareholders who opposed the deal, a Delaware court ruled on Tuesday.

Though the buyers paid $24.9 billion, or $13.75 per share, the company's actual fair value at the time was $17.62 per share, according to Delaware Vice Chancellor Travis Laster.

The decision comes in response to a lawsuit brought by a number of Dell investors who felt shortchanged by the deal. Through what's known as an appraisal suit, they asked the Chancery Court to determine the fair value of their shares at the time.

Only shareholders who voted against the deal are eligible for compensation, which reportedly will total about $35 million. Owners of about 5.5 million shares reportedly were affected by the decision.

Oddly, because of what Vice Chancellor Laster earlier this month called "byzantine" complications in the voting process, one of the deal's biggest opponents -- mutual fund manager T. Rowe Price -- mistakenly voted in its favor. That, in turn, rendered the firm’s roughly 30 million shares ineligible for compensation.

Dell did not immediately respond to a request for comment. Silver Lake declined to comment.

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