You probably think mutual funds are the least likely activist investors. While that was true in the past, the tides appear to be changing. T. Rowe Price just did something it's only done once before in its 70-year history - filed as an activist investor in order to fight the management buyout of Laureate Education, according to the Wall Street Journal.

T. Rowe Price mutual fund manager, Brian Berghuis, ran the numbers and determined that the private deal valued at $3.8 billion for this operator of universities could be valued about 80% higher. Why did he care? T. Rowe Price mutual funds shareholders could be losing as much as $210 million according the the Journal.

Management buyouts tend to work differently than the more traditional outsider takeovers. Managers want to keep the price as low as possible in these deals, while they look for the highest price possible for an outsider takeover.

Fidelity Investments took a similar stance against a deal for a private-equity buyout of OSI Restaurant Partners earlier this year. OSI manages the Outback Steakhouse chain. Fidelity's stance worked and the offer had to be increased before shareholders would approve it.

It's about time that mutual funds take activist stands to protect their shareholders. Mutual fund assets totaled $11.496 trillion in August, according to the Investment Company Institute. As managers of their investors' money, mutual funds have an obligation to make sure people who hold mutual funds get the best bang for their buck. There's power in numbers and if the mutual fund companies became more active in protecting the rights of their shareholders, both stocks and mutual funds shareholders would benefit.

Lita Epstein is the author of more than 20 books including the "Pocket idiot's Guide to Investing in Mutual Funds."

Newest defenders of shareholders' rights -- mutual funds originally appeared on BloggingStocks on Thu, 04 Oct 2007 13:05:00 EST. Please see our terms for use of feeds.

Laureate Education (NASDAQ:LAUR) is in the process of a $3.1 billion buyout deal with Kohlberg Kravis Roberts, Citigroup Private Equity and SAC Capital Management.

The problem is that shareholders hate the deal. Select Equity is going to vote "no," as will T. Rowe Price Associates. Now, there is another dissenter: BlackRock (NYSE:BLK), according to a story in TheDeal.com (subscription required.)

Basically, shareholders think Laureate still has lots of growth potential (especially in foreign markets) and that the $60.50 buyout offer does not reflect this. Counting up the votes for the three dissenters, it is still below 20%. But if a couple more shareholders join the mutiny, it could mean this deal falls apart.

Although Wall Street is not betting on that. Laureate's current stock price is $58.55. You may also check out Select Equity's analysis on the deal at the SEC website.

Tom Taulli is the author of various books, including The Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Laureate Education gets another "F" on its buyout originally appeared on BloggingStocks on Tue, 20 Mar 2007 16:45:00 EST. Please see our terms for use of feeds.

Continue reading An interesting situation brewing in Laureate Education

An interesting situation brewing in Laureate Education originally appeared on BloggingStocks on Sat, 03 Mar 2007 15:10:00 EST. Please see our terms for use of feeds.

Back in late January, Laureate Education Inc. (NASDAQ: LAUR) announced it was going private in a $3.8 billion deal. The investors included the typical private equity players, such as Kohlberg Kravis & Roberts, Goldman Sachs Group (NYSE:GS) and Citigroup Inc. (NYSE:C). Although, this time there was a twist in the form of another investor -- hedge fund S.A.C. Capital Management.

Well, not everyone's happy with the deal. In fact, Laureate's third largest outside investor (with a 7.14% stake), Select Equity Group, sent an interesting letter to management.

The letter doesn't hold back. Simply put, it says that the $60.50 buyout offer is "grossly inadequate." What's more, it alleges that the deal was "flawed by clear conflicts of interest." As a result, the fund is not going to support the deal.

The letter does a pretty good job in going through the valuation analysis. Basically, it does look like the buyout group is getting a good deal (but, this is why they are buying the company, right?)

However, it looks like Wall Street thinks the deal will get done at the proposed offer. Currently, the stock is trading at $59.89, up $0.33.

If you want to check out the letter, you can see it at the SEC web site.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Laureate: Getting schooled by big investor originally appeared on BloggingStocks on Thu, 22 Feb 2007 13:22:00 EST. Please see our terms for use of feeds.