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Tech Data stockholder sues to block $6 billion sale to Apollo Global

Dean Drulias contends that the price shareholders will consider on Feb. 12 is $1.4 billion too low.
Tech Data is based in Largo and employs 2,000 people in the Tampa Bay area.
Tech Data is based in Largo and employs 2,000 people in the Tampa Bay area. [ DIRK SHADD | Tampa Bay Times ]
Published Jan. 8, 2020
Updated Jan. 8, 2020

TAMPA — A Tech Data shareholder has sued to block the company’s pending $6 billion sale to New York private equity firm Apollo Global Management.

Dean Drulias has owned Tech Data stock since 2016, according to his suit, which was filed shortly before Christmas in Hillsborough Circuit Court.

He contends that the $145 that Apollo has offered for each share of Tech Data is a “steep 20 percent discount” when compared with the $183.10 per share that Tech Data’s own investment banker, BofA Securities, has determined would be appropriate under a discounted cash flow analysis of the company’s value.

As a result, he says, shareholders will be deprived of $1.4 billion in value if they approve the sale at a vote scheduled for Feb. 12 and regulators also sign off on the deal.

Drulias names Tech Data and Apollo as defendants, along with Tech Data chief executive officer Rich Hume, former CEO Robert Dutkowsky and eight members of Tech Data’s board of directors.

Tech Data executives and board members have pushed for a sale, Drulias claims, because they would benefit personally from the sale. Six board members stand to be paid from $234,320 to $361,920 because their restricted stock will vest on an accelerated schedule because of the sale. Dutkowsky, who is on Tech Data’s board, would be paid $16.3 million for his restricted stock. And the benefits to Hume, the lawsuit contends, include continued employment leading Tech Data as a privately held company.

Moreover, the suit claims, BofA Securities has a conflict of interest because of its longstanding relationships with Apollo, a $325 billlion investment manager. Apollo paid BofA Securities $150 million in the past two years before it rendered its opinion on the fairness of the Tech Data buyout, and it held about $203 million in interests in Apollo and its affiliates, the suit says.

To avoid jeopardizing that relationship with Apollo, Drulias claims, BofA has offered a conclusion that $145 per share is fair despite its own analysis that the value could be higher. In Tech Data’s proxy statement, BofA Securities said that analysis established a range of potential values for the company’s stock, from $122.15 at the low end to the $183.10 that Drulias cited at the top.

On Wednesday, a Tech Data spokesman said the company doesn’t comment on pending legal matters, so neither Tech Data itself, Hume nor Dutkowsky would respond to the lawsuit. A Bank of America spokesman likewise declined to comment on behalf of BofA Securities, which was not named as a defendant in the lawsuit. The Tampa Bay Times also is seeking comment from Apollo Global.

While Drulias says BofA Securities’ analysis would support a value of $183 per share, no one offered anything close to that during a “go-shop” period where Tech Data reached out to 60 companies to solicit offers on better terms than the $130 per share that Apollo first offered.

During that period, the best competing offer of $140 per share came from Berkshire Hathaway, the mammoth investment and holding company run by Omaha billionaire Warren Buffett. But Buffett dropped out of the bidding after Apollo raised its offer to $145 a share.

No more rival bids for Tech Data, so $6 billion sale is on

Drulias is asking a judge to order that Tech Data update its disclosures about the buyout with information that he considers to be correct and complete. If it doesn’t, he said, the merger should be stopped and he should be entitled to an unspecified amount of damages that would have to be determined later.

In the meantime, Tech Data spokesman Bobby Eagle said, the shareholder vote will take place as scheduled on Feb. 12. Wednesday, Tech Data stock was trading at $144.05 per share.