Dell deal: Is a fight brewing?

The plans to go private just got messier, with the second-largest shareholder saying it's unhappy with the price.

By TheStreet Staff Feb 8, 2013 1:41PM

Dollar sign on keyboard copyright CorbisBy Chris Ciaccia thestreet logo

 

The deal to take Dell (DELL) private isn't dead by any means, but it just became a little more complicated.

 

Reuters reported that Dell's second-largest shareholder, Southeastern Asset Management, is unhappy with the deal to take Dell private at $13.65 a share, saying the PC maker is worth much more than that.

 

Southeastern Asset Management is Dell's second-largest shareholder, owning 7.5% of the company, and in the past has said Dell is worth in the "low $20s," a price far higher than what Michael Dell and Silver Lake Partners are offering for the Round Rock, Texas-based PC company. 


poll conducted by TheStreet shows agreement with SEM -- 87% of respondents to the poll called the premium a "joke," and only 13% approved of the price.

 

SEM couldn't be reached for comment to discuss the deal.

 

Many have said that this is a sweetheart deal for Michael Dell and Silver Lake, and perhaps even for Microsoft (MSFT), which is providing $2 billion worth of financing for the deal in the form of a loan, as it seeks to keep the PC market alive. (Microsoft owns and publishes Top Stocks, an MSN Money site.)

 

Southeastern purchased its stake in Dell well above the $13.65 a share price, and stands to lose hundreds of millions of dollars for its investors should the deal go through at the current price. Dell has agreed to a 45-day "go shop" period, in which the PC maker would look for an alternative deal. But many do not expect another bidder to emerge. Shareholders seem to be left between a (round) rock and a hard place when it comes to viable alternatives. By voting no on the deal, shareholders -- including Southeastern -- could see their positions fall further under water.

 

There may be a silver lining for shareholders, albeit a small one. Originally, Dell had expected the deal would close near the end of the second quarter of the company's fiscal 2014, or during the summer. Dell has pushed back that time frame to Nov. 5, 2013, which may suggest that Dell doesn't anticipate smooth sailing.

 

Several analysts on Wall Street have said an offer of $13.65 a share undercuts Dell's true value. Wells Fargo analyst Maynard Um recently put fair value of a Dell LBO (leveraged buyout) at roughly $15 a share, nearly 10% higher than the actual deal.

 

"We believe this would be a fair deal for equity shareholders given the continued lackluster stock performance and few, if any, near-term catalysts to realize a comparable price," Um wrote in his note.

 

Sterne Agee's Shaw Wu questioned whether "shareholders will approve as it is only a slight premium to its current stock price."

 

The traditional PC market continues to decline thanks to the growth of tablets, and Dell's transition to turn itself into a software and services company is taking much longer than Dell's management or shareholders anticipated.

 

Dell shares were trading slightly lower in premarket trading Friday, off 0.07% at $13.52.

 

 

More from TheStreet.com

4Comments
Feb 8, 2013 4:55PM
avatar
If I owned 130,500,000 shares of Dell at an average cost of $18 there NFW I'd take $13.65 for those shares while Mr. Dell and Mr. Softy got an insiders deal. I'd lose $650,000,000 so they could profit on an insider turnaround.
Feb 10, 2013 11:11AM
avatar

I can think my house is worth $800,000. If the only offers I get are for$ 600,000, guess what the value of my house is.

It's great that Southeastern Asset Management thinks the stock is worth in the low 20s. Let them buy the company then. Let them put their client's money where their mouths are.

Feb 11, 2013 12:39PM
avatar
"Dude you're getting a Dell"   What's a Dell?

MS needs one PC maker to keep windows alive and market it's late to the market surface.


Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

113
113 rated 1
279
279 rated 2
416
416 rated 3
647
647 rated 4
548
548 rated 5
513
513 rated 6
669
669 rated 7
516
516 rated 8
317
317 rated 9
113
113 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
KOGKODIAK OIL & GAS Corp10
UPLULTRA PETROLEUM Corp10
TAT&T Inc9
COPCONOCOPHILLIPS9
DVNDEVON ENERGY CORPORATION9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.