BALTIMORE, June 6, 2016 /PRNewswire/ --
NEWS
T. Rowe Price Group, Inc. (NASDAQ-GS: TROW), today announced
that it will pay up to approximately $194
million to compensate certain clients for a proxy voting
error the firm made in connection with the 2013 leveraged buyout of
Dell, Inc., which was held at the time in a number of portfolios.
These T. Rowe Price mutual funds, trusts, separately managed
accounts, and subadvised clients held, in aggregate, approximately
31 million shares.
At the time of the 2013 Dell buyout, T. Rowe Price's investment
team held a strong view that the merger consideration of
$13.75 per share offered by Dell
significantly undervalued the company. Several T. Rowe Price funds,
trusts, and clients subsequently filed a petition with the
Delaware Court of Chancery to seek
a fair value appraisal for their Dell shares. Due to a proxy voting
error though, voting instructions for our clients' shares were
ultimately submitted as "For" the merger, rather than "Against." On
May 11, 2016, the court ruled that
this voting error rendered T. Rowe Price's fund, trust, and client
shares ineligible to pursue fair value. On May 31, 2016, the court ruled that Dell's fair
value per share was $17.62 and not
$13.75, a difference of more than
28%, validating the firm's original investment thesis.
Based on the court's May 31, 2016,
ruling, the firm is making these 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 expects to record a one-time charge
of approximately $194 million in its
second quarter of 2016, which is expected to reduce net income,
after tax, by about $118 million—or
approximately $0.46 in diluted
earnings per share of common stock. The company will fund the
payments from available cash.
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.
Immediately following this announcement, the T. Rowe Price funds
and portfolios will record the contribution, which will be included
in the next-computed net asset value (NAV) per share as estimated
below.
T. Rowe Price Fund
Name
|
Dell Shares
Held
|
NAV
Impact
|
% NAV
Impact
|
Equity Income
Fund
|
16,500,000
|
$0.14
|
0.45%
|
Science &
Technology Fund
|
7,045,780
|
$0.42
|
1.20%
|
Institutional
Large-Cap Value Fund
|
954,800
|
$0.04
|
0.21%
|
Equity Income
Portfolio
|
685,800
|
$0.15
|
0.53%
|
The figures in the above chart relating to the funds' NAV impact
(and % NAV impact) reflect the change in the per-share net asset
value of each fund's primary share class that would have resulted
from the T. Rowe Price cash contribution to the funds had the
contribution been recorded prior to the market close on
June 3, 2016.
QUOTES
William J. Stromberg, President
and CEO
"T. Rowe Price has a long history of putting our clients' interests
first, and that is what we are doing here."
"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. By
compensating our clients based on the court's May 31, 2016, ruling, clients will come out ahead
as compared with how they would have fared had they taken the
merger consideration."
"The firm's financial strength is rock solid, and we will make
these payments from available cash. At March
31, 2016, our balance sheet showed cash and discretionary
portfolio investment holdings of $1.9
billion. So, while we expect to record a one-time charge in
the second quarter, we do not expect this will have a material
effect on our financial condition or our ability to continue
investing in our people and our strategic priorities."
ABOUT T. ROWE PRICE
Founded in 1937, Baltimore-based T. Rowe Price Group, Inc.
(troweprice.com), is a global investment management
organization with $764.6 billion in
assets under management as of March 31,
2016. The organization provides a broad array of mutual
funds, subadvisory services, and separate account management for
individual and institutional investors, retirement plans, and
financial intermediaries. The company also offers sophisticated
investment planning and guidance tools. T. Rowe Price's
disciplined, risk-aware investment approach focuses on
diversification, style consistency, and fundamental research.
The strategies, products, and services mentioned are offered via
subsidiaries of T. Rowe Price Group, Inc. This does not constitute
a distribution, an offer, an invitation, a recommendation, or a
solicitation to sell or buy any securities in any jurisdiction.
T. Rowe Price, Invest With Confidence and the bighorn sheep
design are, collectively and/or apart, trademarks or registered
trademarks of T. Rowe Price Group, Inc., in the United States, European Union, and other
countries.
OTHER MATTERS
Information included within this news release contains certain
forward-looking information relating to our operating expenses, net
income, and earnings per share on common stock. Forward-looking
statements speak only as of the date on which they are made, and,
except as required by law, we undertake no obligation to update any
forward-looking statement to reflect events or circumstances after
the date on which it is made or to reflect the occurrence of
unanticipated events. Actual results may differ materially from
those in forward-looking information because of various factors,
including, but not limited to, those discussed in Item 1A, Risk
Factors, of our Form 10-K Annual Report for 2015.
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SOURCE T. Rowe Price Group, Inc.