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Delaware Court Denies T. Rowe Funds Appraisal Rights in Dell Transaction

A Delaware Court recently denied a bid by several T. Rowe Price Funds to dispute the value they received for Dell shares in a 2013 merger transaction.  Under Delaware law, a shareholder is able to pursue an appraisal only if the shareholder did not vote for the merger and did not consent to the merger in writing.  While T. Rowe Price had publicly opposed the transaction, it had inadvertently voted its shares in favor of the transaction. 

T. Rowe Price uses an automated system that generates default voting instructions based on the funds’ policies – in this case, the default instruction is to vote in favor of a management supported merger.  At the request of several portfolio managers, T. Rowe Price overrode the system’s default to vote against the merger.  The meeting was adjourned several times, and T. Rowe’s corporate governance specialist confirmed the funds’ votes against the merger several times.  However, in contrast to several earlier adjournments, a new meeting record was created before the meeting where the transaction was ultimately approved.  The new record resulted in a return to the system’s default instruction – a vote in favor of the merger.  No one at T. Rowe logged on to confirm the status of the voting instructions, and therefore the funds’ shares were voted in favor of the merger.  The court found that because its shares were voted in favor of the merger, even if by mistake, T. Rowe could not challenge the value of its shares.