Dell's $24.4B deal opposed by major stockholder

Published on NewsOK Modified: February 8, 2013 at 5:52 pm •  Published: February 8, 2013
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SAN FRANCISCO (AP) — Dell Inc.'s decision to sell itself for $24.4 billion to a group led by its founder and CEO is being ridiculed as a rotten deal by a major shareholder who estimates the slumping personal computer maker is really worth $42 billion.

The missive launched Friday by Southeastern Asset Management Inc. threatens to complicate Dell Inc.'s efforts to end its 25-year history as a public company.

In a letter to Dell's board of directors, Southeastern CEO O. Mason Hawkins threatened to lead a shareholder mutiny unless the company came up with an alternative to the deal announced earlier this week.

Hawkins vowed to wield Southeastern's 8.5 percent stake to thwart the deal currently on the table. Only Michael Dell, the company's eponymous founder and CEO, owns more stock with a roughly 14 percent stake.

Under Dell's proposal, Southeastern and other stockholders will be paid $13.65 per share to leave the company in control of Michael Dell, who founded the business in his University of Texas dorm room in 1984. Michael Dell is contributing about $4.5 billion in stock and cash to help pay for the deal. The rest of the money would be supplied by the investment firm Silver Lake, loans from Microsoft Corp. and a litany of banks. The loans will burden Dell with debts that could leave the company with less money to invest in innovation and acquisitions.

Hawkins derided the price of the proposed sale as "woefully inadequate" and laid out a scenario that values Dell at $23.72 per share, or about $42 billion. The per-share amount mirrors Dell's stock price six years ago, when Michael Dell returned for a second go-round as the company's CEO.

In statement late Friday, Dell said it is standing behind the merits of the current deal. The company, which is based in Round Rock, Texas, emphasized that its board had worked with financial advisers to explore a wide range of alternatives before agreeing to sell the company for $24.4 billion a price 80 percent below Dell's top market value of more than $150 billion at the peak of the dot-com boom 13 years ago.

"The transaction offers an attractive and immediate premium for stockholders and shifts the risks facing the business to the buyer group," Dell Inc. said.

To allow for the possibility of something better coming along, Dell's board had already opened a 45 day window for other potential bidders to emerge.

Hawkins is worried other suitors will be discouraged from bidding because Michael Dell already has lined up a deal to buy the company for what Southeastern believes to be a steep discount.



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