Southeastern Asset Management, which owns an 8.5 percent stake in computer giant Dell, has expressed its ‘extreme disappointment’ at what it calls a ‘woefully inadequate’ offer of $24.4 bn to take the company private.
Michael Dell ‒ who founded the PC maker in 1984, serves as chairman and CEO and owns 14 percent of the company ‒ teamed up with private equity firm Silver Lake and Microsoft to make an offer of $13.65 per share on February 5. If successful, the bid would take the firm, which has been struggling to compete against cheaper rivals and the tablet boom, off NASDAQ for the first time in 25 years.
For the deal to be approved, the majority of shareholders – excluding Michael Dell – must vote in favor of the buyout. In a letter to board members, however, Southeastern says the offer ‘grossly undervalues the company.’
‘We will not vote in favor of the proposed transaction as currently structured,’ states Southeastern, adding that it intends to use all possible measures to block the deal ‘including but not limited to a proxy fight, litigation claims and any available Delaware statutory appraisal rights.’
Southeastern claims the bid ‘clearly represents an opportunistically timed bid to take the company private at a valuation far below Dell’s intrinsic value, and deprives public shareholders of the ability to participate in the company’s substantial future value creation.’ It estimates Dell’s true value at approximately $24 per share – almost double the amount offered in the go-private bid.
Announcing the offer last week, Dell’s board said the bid ‘represents a premium of 25 percent over the firm’s closing share price of $10.88 on January 11, 2013, the last trading day before rumors of a possible going-private transaction were first published.’ Opponents, however, argue that this is far below the $17-$18 per share the company was trading at a year ago.
Last week another investor was reported to have sued Dell over the proposed deal, claiming it was priced 22 percent below the stock price a year ago, according to Reuters. ‘By engaging in the going-private transaction now – in the midst of the company’s transition from a PC vendor to full service software and enterprise solution provider – the board is allowing defendants [Michael] Dell and Silver Lake to obtain Dell on the cheap,’ states the lawsuit.
