Saturday, February 9, 2013

Dell Buyout

Shareholders are being pushed aside in the proposed Dell buyout. Michael Dell will benefit with this buyout, his $3.7 billion stake could more than triple in five years. But the company's biggest outside investor Southeastern Asset Management, opposes the deal. They said that it "grossly undervalues the company."

Southeastern believes the price is much too low and will vote against the proposed deal. Southeastern values the company at $23.72 a share, greater than the $13.50 to $13.75 a share that Dell and his partners are offering.

“We would have endorsed a transformative transaction that would have provided full and fair value to Dell’s public shareholders, including a leveraged recapitalization or a go-private type sale where current shareholders could elect to continue to participate in a new company with a public stub,” Southeastern said.

“Unfortunately, the proposed Silver Lake transaction falls significantly short of that, and instead appears to be an effort to acquire Dell at a substantial discount to intrinsic value at the expense of public shareholders.”

"This deal is so compellingly unfair to shareholders that I don't know where to begin," says Richard Pzena, chief investment officer at Pzena Investment Management, which held 14 million shares on Sept. 30. His firm values Dell at about $25 a share. The stock was unchanged at $13.63 last week, after gaining about 1% Friday afternoon on the Southeastern news.

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