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Dell Proposal to Go Private 'Grossly Undervalues' Firm, Shareholder Charges

Feb. 9, 2013
The letter from Southeastern said the deal "represents an opportunistically timed bid to take the company private at a valuation far below Dell's intrinsic value."

An investment firm claiming to be the largest outside shareholder in Dell said Friday the proposal to take the firm private for $24.4 billion "grossly undervalues" the computer maker.

Southeastern Asset Management, which claims to hold 8.5% of Dell (IW 500/20) shares on behalf of clients, said it would fight the proposal and noted its objections to the deal in a letter to the board of directors, also filed with U.S. securities regulators.

"We are writing to express our extreme disappointment regarding the proposed go-private transaction, which we believe grossly undervalues the company," the letter said.

"We will not vote in favor of the proposed transaction as currently structured.

"We retain and intend to avail ourselves of all options at our disposal to oppose the proposed transaction, including but not limited to a proxy fight, litigation claims and any available Delaware statutory appraisal rights."

Dell unveiled its plan to go private Tuesday in a $24.4 billion deal, giving founder Michael Dell a chance to reshape the former No. 1 PC maker away from the spotlight of Wall Street.

The company said it had signed "a definitive" agreement to give shareholders $13.65 per share in cash -- a premium of 25% over Dell's closing share price on Jan. 11, before reports of the deal circulated.

The move, which would delist the company from stock markets, could ease some pressure on Dell, which is cash-rich but has seen profits slump, as it tries to reduce dependence on the slumping market for personal computers.

The plan is subject to several conditions, including a vote of unaffiliated stockholders.

Opportunistic Timing Alleged

The letter from Southeastern said the deal "represents an opportunistically timed bid to take the company private at a valuation far below Dell's intrinsic value."

Southeastern said the value of Dell's assets and cash on hand suggests "a total corporate value approaching $24 per share" without taking into account Dell's growth prospects.

"By any objective measure, [the buyout offer] is woefully inadequate," the letter said.

The buyout deal calls for a "go shop" period to allow shareholders to seek a better offer.

Board members could implement a different plan, including a "Dutch auction" that would allow shareholders to sell back their stock at various prices, according to the letter.

It said another possibility that has not been considered would be to sell some of Dell's business units separately.

Go Shop Process is “Not Sufficient”

"We are concerned that given the participation of Michael Dell in this transaction, that a traditional go shop process is not sufficient to ensure that the company receives superior offers," the letter said.

The buyout plan also calls for a $2 billion loan from Microsoft along with financing from by Bank of America-Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets.

Analysts have said the deal may give the company a chance to regain some footing in a market in which smartphones and tablets are overtaking laptop and desktop computers.

Copyright Agence France-Presse, 2013

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