T. Rowe Price Group Inc.'s fund investors missed out on their share of a court judgment over Dell Inc.'s 2013 buyout because the Baltimore mutual fund manager accidentally voted in favor of the deal.
Now T. Rowe may be trying to make it right and stave off a class action lawsuit, according to analysts and media reports.
The problem stems from a ruling last month by a Delaware judge who found that Dell undervalued its $25 billion buyout to eventually go private by $6 billion, and may owe some investors $35 million.
T. Rowe technically voted in favor of the buyout because of an administrative error, and the company's clients will not reap the benefits of the decision.
Analysts say T. Rowe is expected to devise a way to compensate fund investors for the mistake, in part because it could face legal action if it doesn't. The Wall Street Journal reported Friday that such a deal could come as early as next week.
"They're trying to do right by their fund shareholders," said Greggory Warren, a senior stock analyst with Morningstar Inc. "It's their error, not their shareholders' error."
T. Rowe spokesman Bill Benintende declined to comment on reports of an impending deal.
"We're in the process of reviewing the legal opinions and considering our options," Benintende said.
If T. Rowe makes a deal, analysts said the company must adequately compensate fund investors but also minimize losses for the company's shareholders. Erik Oja, an equity analyst with S&P Global Market Intelligence, said T. Rowe will likely pay out close to $190 million, the amount that investors were disqualified from receiving.
"It's a major mistake," Oja said. "It's disastrous and one-of-a-kind and will likely cost T. Rowe Price."
T. Rowe Price had vocally opposed Dell founder Michael Dell's plans to take the company private, arguing that the $24.9 billion buyout undervalued the company.
The company voted against the plan in an initial vote. But when the deal was renegotiated, the company's automated system for informing shareholders how to vote automatically defaulted to a "yes" vote, according to court records. Company officials have acknowledged that they failed to manually change the settings to reflect that a "no" vote should be cast.
T. Rowe was among the investors who sued Dell and private equity firm Silver Lake in 2013 for a better price, a type of lawsuit called an appraisal. Later, in 2014, T. Rowe realized the error and Dell challenged the company's ability to sue.
Delaware's Court of Chancery upheld Dell's challenge May 11.
The same court ruled May 31 that Dell underpaid by 22 percent. The fair per-share price for Dell stock should have been $17.62, not the $13.75 a share paid under the deal, according to the ruling. As a result, Dell may owe $35 million to investors who held some 5.5 million shares.
T. Rowe had about 30 million Dell shares in several mutual funds.
T. Rowe reported $1.9 billion in operating income in 2015, and analysts expect operating income of $1.8 billion this year. The company has $765 billion in assets under management.