Michael Dell and Silver Lake’s $24.9bn Dell buyout was underpriced, court rules

31 May 2016

A court has ruled that Michael Dell and Silver Lake Partners underpriced their 2013 buyout of Dell by 22pc

A court in Delaware has ruled that Michael Dell and Silver Lake Partners’ 2013 buyout of Dell was underpriced by 22pc and they may now have to pay tens of millions to investors.

Delaware vice-chancellor Travis Laster ruled that the fair value of Dell’s stock at the time of the buyout was $17.62 per share.

However, the buyout was priced at $13.75 per share.

The case arose when investors who voted against the deal filed a lawsuit at the Delaware Court of Chancery to determine a fair value of the stock.

They originally claimed that that the fair value was as high as $25 per share.

Other shareholders who sued claimed that Dell was on the cusp of a major turnaround and was worth more than twice what Michael Dell and Silver Lake had paid.

However, the ruling, which can be appealed, could add millions of dollars to the final cost of the deal.

The bulk of the stock appraised in the case belonged to investment firm T Rowe Price.

The outcome could have been more costly for Dell and Silver Lake had the judge not disqualified 27m shares that had been wrongly voted in favour of the buyout.

Dell image via Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years